IT Stocks Under Pressure: Analysts Recommend ‘Sell on Rise’ as Q1 Numbers Disappoint
The IT Stocks Sell on Rise Strategy is back in focus this earnings season. As India’s top software companies begin releasing their Q1 FY26 results, investor sentiment around tech stocks has started to shift. A growing number of analysts are now suggesting that investors book profits during short-term bounces, rather than hold on for long-term upside.
This “sell on rise” view is gaining traction due to weaker-than-expected earnings, global headwinds, and valuation concerns. As the IT sector—once seen as a safe haven—shows signs of fatigue, this strategy is quickly becoming the preferred approach.
What Is the IT Stocks Sell on Rise Strategy?
The IT Stocks Sell on Rise Strategy is a short-term investment approach where investors take advantage of temporary upward price movements to sell their holdings. This is usually recommended in bearish or uncertain market phases—like the one Indian IT is currently facing.
Rather than waiting for long-term recoveries, this strategy helps investors lock in gains before stocks potentially decline again.
Why IT Stocks Are Under Pressure in FY26
The latest Q1 numbers from Tata Consultancy Services (TCS) show the challenges. The company reported a modest 7.4% profit rise, but revenue growth and deal wins lagged expectations. The management cited “delayed client decisions” and “soft global demand” as the main concerns.
Similar issues are likely to be reflected in upcoming results from Infosys, HCL Tech, and Wipro. These firms are experiencing slower decision-making cycles, shrinking discretionary budgets, and lower client spending—especially in key overseas markets like the US and Europe.
Anand James on IT Stocks Sell on Rise Strategy
One of the strongest voices advocating this strategy is Anand James, Chief Market Strategist at Geojit Financial Services.
He states, “The IT Stocks Sell on Rise Strategy is a sensible approach right now. With valuations elevated and earnings growth muted, using rallies to exit or trim positions reduces downside risk.”
James adds that while occasional price jumps may occur post-results, these should be seen as selling opportunities rather than signs of a sustainable recovery.
Global Factors Reinforce the Strategy
The IT Stocks Sell on Rise Strategy also makes sense in light of international developments. Inflation remains sticky in Western economies. The US Federal Reserve has paused its rate hikes for now, but uncertainty continues. Europe’s tech budgets are tightening, and China’s recovery is slower than expected.
With over 80% of Indian IT revenue coming from foreign clients, any global weakness directly impacts domestic earnings. This adds further weight to the “sell on rise” playbook.
Valuation Concerns Are Growing
Even as fundamentals weaken, valuations for IT stocks remain high. Many large-cap stocks are trading at 25–30 times trailing earnings, well above their 10-year average.
“Investors need to realize that the IT rally of 2023 and early 2024 priced in perfection. That’s no longer the case,” says equity advisor Deepika Singh. “The IT Stocks Sell on Rise Strategy protects investors from holding overvalued positions in a declining growth phase.”
Technical Indicators Support a Cautious View
From a charting perspective, the Nifty IT index has dropped over 6% in the past two weeks. It’s currently testing support near 36,800. If it breaks below 36,500, analysts expect a sharp correction toward 35,000.
This technical setup reinforces the IT Stocks Sell on Rise Strategy, as key levels are being tested and investor confidence remains shaky.
How Retail Investors Should Approach This Phase
For investors who hold large positions in Infosys, TCS, or Wipro, the sell-on-rise approach offers a low-risk way to secure profits and rebalance portfolios.
Financial planner Nidhi Arora advises:
“If you’re holding IT stocks from lower levels, start trimming above resistance zones. Re-enter only if fundamentals improve or valuations drop closer to long-term averages.”
She recommends using tools like trailing stop-losses and resistance levels to implement the IT Stocks Sell on Rise Strategy effectively.
Mutual Fund Trends Back the Strategy
Recent portfolio disclosures from mutual funds reveal that many top equity schemes are also paring back their IT exposure. For example:
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Axis Bluechip Fund reduced holdings in Infosys
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ICICI Prudential Balanced Advantage Fund has trimmed TCS exposure
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Nippon India Growth Fund is overweight on manufacturing instead of IT
These changes mirror the institutional view supporting the IT Stocks Sell on Rise Strategy.
Historical Evidence
The current downturn isn’t the first time this strategy has been recommended. During 2012 and again in 2019, Indian IT stocks saw multi-quarter earnings pressure. In both cycles, “sell on rise” helped investors preserve capital and re-enter at better valuations later.
Today’s setup feels similar. Slower earnings, weak guidance, and macro risks suggest that downside may persist for a few more quarters.
Risks to Watch
While the IT Stocks Sell on Rise Strategy is sound for now, it carries risks:
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If Q2 results in October show a sharp improvement, IT stocks could rally fast
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A surprise rebound in global tech demand would reverse sentiment
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Sudden rupee depreciation might support exporters and lift IT valuations
Hence, investors using this strategy should remain alert to news flow and earnings revisions.
Conclusion: Patience Pays
The IT Stocks Sell on Rise Strategy isn’t about pessimism—it’s about timing. In a sector where long-term potential remains strong, but short-term visibility is low, this approach offers a disciplined way to manage exposure.
As Q1 earnings roll out and valuations remain rich, this is not the time to buy the dip blindly. Wait for clarity, use rallies to exit weak stocks, and prepare to re-enter when the risk-reward improves.
In the fast-evolving world of tech and finance, strategy—not sentiment—is what drives returns.
Source: Economic Times
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