Nifty IT index hits record high; Infosys, HCL Tech, Coforge gain 2%

Shares of information technology (IT) companies were back in action at the bourses on Wednesday, with the Nifty IT index hitting a record high of 22,896, up 1 per cent on the National Stock Exchange (NSE). The index surpassed its previous high of 22,619, touched on October 13, 2020.

Infosys, HCL Technologies and Coforge were up 2 per cent, while Tata Consultancy Services (TCS), Mindtree and Larsen & Toubro Infotech were up 1 per cent on the NSE.

As per media sources, IT service providers and business process management firms expect new business opportunities in Covid 19 vaccine distribution plans. The deal size is expected to be in the range of $40 million- $50 million.

TCS was up 1.5 per cent to Rs 2,840 on the NSE in intra-day trade, gaining 5 per cent in the past four trading days. The stock of the IT bellwether is trading close to its record high of Rs 2,885, touched on October 8, 2020. It turned ex-date of buyback of November 26, 2020. The TCS board, on October 7, had approved a buyback of Rs 16,000 crore to buy back around 53.3 million shares at Rs 3,000 per share.

Ramco Systems, Zensar Technologies, Mastek, eClerx Services, Accelya Solutions India and Tanla Platforms were up between 5 per cent and 8 per cent on the BSE.

The digital acceleration, large deal wins, client mining, market share gains and margin improvement remain key long-term drivers for IT sector, according to analysts.

In the July-September quarter (Q2FY21), all IT companies reported healthy growth in dollar revenues (average Tier-1 & Tier-2 IT companies witnessed 6 per cent growth QoQ). This was mainly led by healthy traction in digital revenues. Tier-1 & Tier-2 companies also witnessed robust margin expansion (in the range of 50-410 bps QoQ) led by higher utilisation, offshoring, lower travel cost, lower discretionary spend and lower sub-contracting cost.

Tier-1 and Tier-2 IT companies have seen healthy order book and deal pipeline mainly led by acceleration in digital technologies like cloud, cyber security, data, experience and automation. Improving deal wins have led to many companies being optimistic on their revenue growth in coming quarters, ICICI Securities said in Q2FY21 earnings wrap.

In subsequent phases, enterprises will see new age technologies developed around cloud to lead to new business models and differentiated customer experiences. We believe this could lead to double digit revenue growth for IT companies in the longer term. Further, vendor consolidation opportunities, acquisition of captives and offshoring & automation (for cost take out deals) are other key revenue drivers, it said.