TCS, Infosys: Positive Q3 results may trigger next leg of rally in IT stks

In a departure from past trend, analysts believe that Indian IT companies may post a strong performance for the third quarter of FY21 (Q3FY21)

Information technology (IT) major Tata Consultancy Services (TCS) will kick off the December quarter earnings season for the sector, on Friday. In a departure from past trend, analysts believe that Indian IT companies may post a strong performance for the third quarter of the financial year 2021 (Q3FY21) on account of healthy order pipeline, large deal signings and going by strong earnings from Accenture. 

Further, improvement in demand post Covid-19, acceleration in adoption of public cloud model, lower furloughs and decent growth in sectors such as consumer, technology and healthcare are likely to add to the revenues of the IT companies, they say. READ MORE

It is this optimism that has lifted the Nifty IT index 12.5 per cent in the last one month (till January 7, 2021). The index has scaled fresh lifetime high in the process. In comparison, the benchmark Nifty50 index has risen 5.85 per cent in the same period. Among individual stocks, Wipro has zoomed 13.44 per cent and HCL Technologies 12.75 per cent in the last one month. Infosys and TCS have also gained over 10 per cent, each.

Ahead of their Q3 earnings announcement, here's how IT stocks look on the charts

NIFTY IT INDEX: After scaling the 26,000 mark, the index is witnessing minor profit-booking. This level may act as a mild resistance for a few sessions ahead. A defensive trend above 26,120 mark may induce more upside towards 28,000 level from a medium-term view. The support comes at Rs 25,000 levels. The counter is witnessing buying momentum in the overbought territory of the Relative Strength Index (RSI), as per the weekly chart. CLICK HERE FOR THE CHART

Tata Consultancy Services (TCS): The medium-term trend is bullish till the stock defends Rs 2,900 levels firmly. The upside may be seen towards the uncharted territory of Rs 3,500 and Rs 3.700 mark. It needs to conquer Rs 3,150 for the next upward bias. The Moving Average Convergence Divergence (MACD) is rising upward comfortably with no signs of weakness. CLICK HERE FOR THE CHART

Infosys Ltd (INFY): The daily chart indicates a selling pressure in the overbought condition of RSI. Going forward, the stock of Infosys needs to conquer Rs 1,300 levels to start a new bullish trend. Till the support of Rs 1,200 is held on the closing basis, the upside bias may remain intact. After conquering the Rs 1,300 mark firmly, the trend may see a rally towards Rs 1,550 levels, as per the daily chart. CLICK HERE FOR THE CHART

Wipro Ltd (WIPRO):  A very small consolidation in the range of Rs 390 to Rs 380 levels has resulted in a breakout towards Rs 410 levels, as per the daily chart. Now, the counter is displaying stability, which means further upside in coming sessions towards Rs 430 and Rs 450 levels. The closing basis support comes at Rs 407 levels. The RSI is witnessing buying momentum in the overbought condition of RSI, suggesting no triggers for a big sell-off. CLICK HERE FOR THE CHART

HCL Technologies Limited (HCLTECH): This stock saw some profit-booking as it neared the Rs 1,000-mark. This may see accelerated selling pressure, only if Rs 950 level is breached on the downside. The RSI has seen selling pressure in the overbought condition, however, till the support level is held firmly, the negative bias may not see aggressive intent. CLICK HERE FOR THE CHART