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The was the top performing sectoral index on Friday, gaining 2.21% to 28,724.05. This sector has given some pain to investors this year and was also one of the worst-performing sectors since the beginning of 2022 with the index falling from the year’s high of 39,446.7 to a 52-week low of 26,190.3, depicting a fall of over 33%.
Now as many sectors seemed to have played their part in supporting the broader markets, the IT sector is looking to take the lead role from here. The rally in the IT pack on Friday seems like the sectoral rotation is happening and now the money is flowing into beaten-down IT counters. One company that has come on my radar that has outperformed its peers in the IT space is 3i Infotech Limited (NS:). It has a market capitalization of INR 791 crores and provides a set of IP-based software solutions with a range of IT services to a variety of industry verticals.
Image Description: Daily chart of 3i Infotech with volume bars at the bottom
Image Source: Investing.com
Just like other IT stocks, the shares of 3i Infotech have also taken a beating, tanking from the year’s high of INR 96.6 to a low of INR 37.25. After marking a low, the stock moved in a sideways trend for some time which reflected that the imbalance in the demand-supply equation was now tipping more towards the demand side. Gradually, the share price of 3i Infotech started to pare some of the losses and turned higher, making higher highs and higher lows. Looking from a distance, this price action has led to a formation of a beautiful rounding bottom pattern which is a trend reversal pattern and marks an ending of a downtrend.
In the last session, the stock surged 11.8% to INR 52.55, clocking the highest level in over 4 months and that too when the IT pack is hovering around their 52-week lows. This visible relative strength would play a key role in taking the stock higher and faster than peers, in case the sectoral strength comes back.
On the upside, there is good headroom for the stock to travel all the way to a level of INR around INR 65. As the stock is inching upwards, volume spikes are also being seen on the charts which is quite a healthy sign. The 10-day average volume which stood at 306K shares at the beginning of the previous month, is now over 3 times higher at 1.1 million shares. In a nutshell, investors in 3i Infotech are probably only waiting for a rebound in this sector and the rest would be taken care of by the relative strength of the stock.
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