IT stocks rally ahead of US election outcome; Infosys, Wipro advance 4%

Shares of information technology (IT) companies were in focus in the early morning trade on Wednesday with the Nifty IT index gaining 3 per cent amid counting of votes in the crucial US presidential election. According to the latest trend, Democratic candidate Joe Biden has secured 209 electoral votes so far, while Donald Trump has won 118. A candidate needs to win 270 electoral votes to capture the presidency.

According to market analysts, it would be a win-win situation for the Indian IT sector in both the scenarios. Biden has indicated relaxation in H-1B visa norms while Trump's win is expected to boost the US dollar, which, will be positive for Indian IT companies as Indian software exporters derive a large share of their business from the US. READ MORE

Among individual stocks, Infosys and Wipro were up 4 per cent, while Coforge, Larsen & Toubro Infotech, Tech Mahindra and Mindtree were up 3 per cent. HCL Technologies, Tata Consultancy Services and Mphasis, meanwhile, were up 2 per cent on the National Stock Exchange (NSE) today.

At 09:41 am, the Nifty IT index, the top gainer among sectoral indices, was up 2.9 per cent, as compared to a 0.71 per cent rise in the Nifty50 index. The IT index had corrected 8 per cent from its record high level of 22,619 points touched on October 13, 2020 on valuation concerns, against 1 per cent decline in the benchmark index during the same period till Tuesday.

“Biden has indicated raising corporate taxes and capital gains tax if voted to power. This has seen investors book profit ahead of the outcome in the US and the money will look at other geographies, including EM. US Federal Reserve (US Fed) on its part is likely to keep the monetary policy accommodative and more stimulus is expected, which again will benefit EM. On the other hand, a Donald Trump win will see US dollar strengthen and could also be negative for world trade given his earlier stance on China,” said Jyotivardhan Jaipuria, founder Valentis Advisors. CLICK HERE FOR FULL REPORT

However, foreign brokerage firm, Credit Suisse has announced major changes to its sectoral preferences. The brokerage has gone neutral on IT, from a strong overweight (OW), citing high valuations and a relatively muted growth forecast. “After a 37 per cent bounce, the relative price-to-earnings (P/E) is now the highest since 2013, and the gains going forward are likely to be growth-dependent, which appears unlikely to break out of the 10-12 per cent range,” said Credit Suisse strategists, led by Neelkanth Mishra, in a note.