Among the two leaders of the IT space, Infy had conceded the top spot to TCS long ago and had remained content playing second fiddle. The 1 year chart shows that while the correlation between the two stocks is almost exact. However in more recent times we find that the trends in Infy (purple line) have started turning up and now the stock is seen trading far better than TCS (green line)
This aspect gets clarified further when we look at the 6 month chart of relative performance. We can see that there is now a crossing of the Purple line over the Green line, implying that TCS prices are under pressure compared to Infy. This is the first time such a crossover is happening in over two years.
Seeking more information on the same over a shorter period we find that although past data overhang ensured that TCS traded at a higher multiple, it is really been Infy that has been delivering better returns across a 3 month period. Here we can see that Infy has been consistently doing better than TCS and this extent of out-performance is actually picking up speed in more recent times.
It is obvious that Infy should be the go-to stock in the IT space for now. Pair traders can also try their hand with Long Infy – Short TCS type trade whenever that ratio falls back into tradable range.
NIFTY IT has been trading in a range for the past couple of weeks now. The recent decline from the range high finds selling pressure at every attempt of rise. But the fact, we notice is, the decline is a damage in time as compared to the rise witnessed from the lower levels of the range. Thus, this shows the interest in selling is getting exhausted and fresh news flow will act as a trend setter.