Nifty IT index surges 2%; Infy, TCS, Tech Mahindra, Coforge gain up to 3%

The US market ended higher overnight, led by gains in technology stocks, after US Federal Reserve chairman indicated that the central bank may slow pace of rate hikes. Nasdaq Composite jumped 4.4%

Shares of information technology (IT) companies were in focus on Thursday with the Nifty IT index surging 2 per cent on the National Stock Exchange (NSE) in the intra-day trade. The rally comes after US Federal Reserve chairman indicated that the central bank may slow the pace of interest rate hike.

The US market ended higher overnight, led by gains in technology stocks. Nasdaq Composite jumped 4.4 per cent on Wednesday.

Back home, shares of Coforge and L&T Technology Services advanced 3 per cent, while Tata Consultancy Services (TCS), Infosys, HCL Tecnologies, Wipro, Persistent Systems, Tech Mahindra, and Larsen & Toubro Infotech up 2 per cent each on the NSE. At 09:24 AM, the Nifty IT index was up 2 per cent as compared to 0.60 per cent rise in the Nifty 50 index.

LTM (last twelve month) attrition for all companies, except TCS and LTI, moderated in the July-September quarter (Q2FY23) while all companies have indicated attrition will moderate further in H2.

Q2FY23 saw continued growth momentum of IT companies due to strong execution based on healthy order wins in earlier quarters. The demand environment remains robust with stable TCV (total contract value) reported by most companies in Q2.

"The companies maintained their revenue guidance for FY23 which takes into consideration, furloughs in Q3, and some impact of slower decision making on the client side in the whole H2. Clients are looking to spend on both revenue maximisation as well as cost optimisation programmes with IT companies looking to capture both legs of growth. Clients are of the opinion that technology will be the last area to be impacted due to weak macros," analysts at ICICI Securities said in Q2 earnings wrap.

Meanwhile, analysts at Anand Rathi Research is positive on Infosys, a leader in the next-generation digital service and consulting.

"Though company sees some caution due to mortgage issue in financial services, caution in hi-tech and telecom but it continuous to gain market share in cloud and digital business, reduction in employee attrition rate from the past 3 quarters and large deal wins," the brokerage firm said in Q2 result update.

As regards to TCS, analysts at Emkay Global Financial Services believe the company is well placed to navigate the challenging demand environment, given its well-diversified offerings and healthy mix of growth & transformation as well as cost takeout & efficiencies projects.