Nifty IT extends gains for third session, up 8%; check top picks by analyst

Prashanth Tapse of Mehta Equities said that while IT stocks have seen some improvement in price, the broader fundamentals of the sector remain challenging due to relatively subdued growth expectations

IT stocks: The Nifty IT index extended its winning streak for the third consecutive session on Tuesday, rising 4 per cent to hit an intraday high of 29,559.85. The index has rallied 8 per cent over the past three trading sessions, reflecting renewed buying interest in technology stocks from the lows.

 

On a Y-T-D basis, the index is, however, still down 22 per cent, with just one constituent delivering positive returns. 

 

As of 11 AM, the Nifty IT index was the top-performing sectoral index, trading higher by 1,115 points, or 3.9 per cent, at 29,507.

 

All 10 constituent stocks of the index were trading firmly in the green. Coforge and Mphasis led the gains, rising over 5 per cent each to ₹1,428 and ₹2,262, respectively. Tech Mahindra advanced 4.8 per cent to ₹1,499, followed by Oracle Financial Services Software (OFSS) at ₹9,837, Persistent Systems at ₹5,168, LTIMindtree at ₹4,263, and Infosys at ₹1,191 - all gaining more than 4 per cent.

 

Other constituents, Tata Consultancy Services (TCS), Wipro, and HCLTech, gained around 3 per cent to trade at ₹2,354, ₹197.50, and ₹1,174, respectively.  CHECK Stock Market LIVE Updates    IT stocks: Coforge, Persistent Systems top picks

 

According to Prashanth Tapse, senior vice president of research at Mehta Equities, while IT stocks have seen some improvement in price performance recently, the broader fundamentals of the sector remain challenging due to relatively subdued growth expectations. At the same time, valuations have become more attractive compared to historical levels.

 

He added that rupee weakness has also helped IT companies from an earnings view because they do business in USD.  Meanwhile, the rupee depreciated 18 paise to 96.38 against the US dollar today as market sentiments continue to dampen amid simmering West Asia tensions and continuous FPI selling.

 

Speaking on stock selection within the IT space, the analyst emphasised the need for a selective approach. According to him, only a few companies have guided for double-digit growth.

 

Tapse added that he favours midcap counters like Coforge and Persistent Systems.   CHECK Q4 Results Today

 

Nifty IT index: Technical View

 

After witnessing continuous selling pressure over the past few weeks, the Nifty IT Index had touched a low of 27,070 levels. 

 

Harish Jujarey, AVP, head - technical equity research, Prithvi Finmart, said that the index is currently witnessing a relief rally. From a technical standpoint, the index has moved closer to its 50-day moving average, which is placed around the 29,750-mark. 

 

The momentum indicator RSI, which had slipped into the oversold zone during the recent decline, has recovered towards the 50 level, indicating an improvement in near-term momentum.

 

"Despite the ongoing recovery, the broader trend continues to remain weak as the lower top–lower bottom formation is still intact. A decisive breakout above the 50 DMA zone of 29,750–30,000 would be crucial for a short-term trend reversal," he said, adding that failure to sustain above this band may result in the index resuming its broader downtrend, with the possibility of revisiting the 2023 low near 26,200 levels.  ===================================== 

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