IT stocks rally; Mindtree, Wipro advance nearly 3%, Tech Mahindra up 2%

Shares of information technology (IT) companies gained in an otherwise subdued market on Monday with the Nifty IT index climbing 1.5 per cent to 18,306.95 levels. Of 10 constituents, 8 were trading in the positive territory. 

At  11:17 AM, the Nifty IT index was trading 0.85 per cent higher at 18,175.80 levels. Among individual stocks, Mindtree was ruling nearly 3 per cent higher at Rs 1,166.75 and was the top gainer on the Nifty IT index. Wipro, NIIT Tech, and Tech Mahindra were up over 2 per cent each.  Meanwhile, Infosys was up 0.7 per cent and HCL Technologies was up 0.5 per cent.  On the flip side, Larsen & Toubro Infotech (LTI), and Mphasis were trading in the red. 

In comparison, the benchmark Nifty50 index was trading at 11,199, up 0.19 per cent. 

In a sector update report issued on August 12, analysts with Kotak Institutional Equities note that the banking and financial services, and insurance (BFSI) vertical was quite resilient for Tier-1 IT in June 2020 quarter.

"We note that IT companies did not indicate any significant pricing pressure or requests for extended payment terms from clients. Delay in client approvals, supply constraints, delay in remote onboarding were a few temporary obstacles highlighted by some companies. These were mostly resolved during the June 2020 quarter and do not pose further headwinds," the brokerage said. 

It expects a healthy recovery in the BFS vertical for IT services companies in the near term. Medium-term prospects appear to be healthy given the longer-term focus of BFS firms on technology investments to spur growth and increase productivity," the brokerage added. Among Tier-1 IT companies, Kotak Securities is positive on TCS and Infosys, as, it said, these companies have broad-based strength across services and geographies and are well-positioned to benefit from demand recovery in BFS. In the midcap space, the brokerage is bullish on LTI.

Motilal Oswal Financial Services (MOFSL) note that as more of the physical economy migrates to the digital space, Indian IT would be the key second-order beneficiary. "Accordingly, we believe the rerating was due. Despite the strong rally, we continue to prefer Infosys, TCS, HCL Tech, and Wipro among the large-caps and LTI, Mindtree, and Persistent systems among the mid-caps," the brokerage said in a report dated August 6. 

Since June 1, the Nifty IT index has gained 26 per cent (as of August 14) while the Nifty50 index has risen nearly 14 per cent during the period, NSE data shows.