The Nifty IT index slipped over 1 per cent to a low of 28,204 in Friday's intra-day trade amid a gap-down opening in the market. However, thus far in July, the IT index outperformed the market, gaining 7.5 per cent as against 1 per cent decline in the NSE benchmark Nifty 50.
Among stocks, HCL Technologies and Persistent Systems surged up to 16 per cent each, while LTM, Mphasis, TCS and Tech Mahindra gained in the range of 10-12 per cent.
On Friday, Infosys declined over 2 per cent to ₹1,024 levels. OFSS, Mphasis and Wipro were the other notable losers. On the other hand, CoForge held a per cent gain.
Analysts attributed the recent rally in IT stocks to bargain hunting following the Q1 results, as they believed that a sharp fall in prices earlier this year had priced in most of the pain.
Gaurav Garg, Research Analyst at Lemonn Markets Desk says that the IT Q1 earnings signal stabilization, and not a turnaround. He highlights that the real revenue growth for top Tier IT companies was just 0-3 per cent in constant currency terms, with acquisitions and a weak rupee doing the heavy lifting.
"Acquisitions and a weak rupee are doing the heavy lifting in the reported numbers. In case of Infosys, the stock's 35 per cent fall this year has priced in a lot of pain but a trimmed outlook says the demand inflection the bulls are waiting for hasn't arrived, and the next two quarters of deal conversion will decide whether this is a base or a value trap," says Garg.
ALSO READ | Infosys falls 2% post Q1; analysts cautious on guidance cut, trim targets Going ahead, Garg reckons that investors should watch for bookings-to-revenue conversion over Q2 and Q3. If the record order books of this quarter start showing up in constant-currency growth by the December quarter, the sector could see re-rating. On the flip side, in case Artificial Intelligence (AI) deflation swallows the volume recovery, these valuations are fair, not cheap, adds the analyst.
Meanwhile, Laxmikant Shukla, Technical Analyst, Institutional Equities Research at YES Securities flags that after a 12 per cent rally from the lows; the Nifty IT index is now seen countering overhead resistance around its 100-day moving average and the 23.6 per cent Fibonacci retracement from 40,301 to 25,699.
The analyst reckons that the IT index needs to deliver a decisive close above 29,500 to confirm a sustainable trend reversal. Such a breakout would open the path toward 30,500, aligning with the next key supply zone and the 38.2 per cent retracement region, Shukla adds.
Among frontline IT stocks, the analyst has a constructive view on select stocks such as TCS, HCL Technologies and Tech Mahindra. Here's a detailed technical outlook on Infosys, TCS, HCL Technologies and Tech Mahindra by Laxmikant Shukla of YES Securities.
Infosys
Current Market Price: ₹1,024
Infosys on Friday staged a rebound from the ₹980–₹1000 support band, establishing a base and demonstrating buyers’ willingness to defend lower levels, notes Shukla.
The stock, however, paused near the 50-day Simple Moving Average (SMA) and slipped into a mild corrective phase, it now requires a sustained move above the ₹1,115–₹1,120 zone to confirm a revival in upward momentum," says analyst.
Adding that, such a breakout could pave the way for an advance toward the ₹1,180–₹1,200 region with the ₹980–₹1,000 zone continuing to act as a dependable support floor.
TCS
Current Market Price: ₹2,243
TCS has been moving within a rising channel after forming a bottom near ₹1,975 in recent sessions, indicating the development of a support base aligned with the previous swing low, notes the analyst.
Shukla believes that given its current positioning, the downside appears limited for TCS, offering an attractive opportunity to accumulate with a favourable risk-reward setup for the short to medium term.
The analyst recommends buying TCS around ₹2,220–₹2,240 with a stop loss at ₹2,100 for a potential target of ₹2,500. This implies a potential gain of 13.7 per cent from present levels.
HCL Technologies
Current Market Price: ₹1,249
HCL Tech stock rebounded from its ₹1,030 low to around ₹1,210, which coincides with the key 23.6 per cent Fibonacci level, notes Shukla.
The analyst believes that a decisive close above ₹1,260 with strong volume would signal a breakout toward ₹1,320 and ₹1,405 levels. Until then, the stock remains at a critical pivot zone. The upside target is pegged roughly 12.5 per cent above the current market price.
ALSO READ | HCL Tech rallies 24% from July low; hits 3-month high on huge volume Going ahead, Shukla sees support for HCL Tech stock around the base builds the consolidation phase this month around ₹1,170 and ₹1,140 levels.
Tech Mahindra
Current Market Price: ₹1,544
Shukla highlights that
Tech Mahindra delivered a strong breakout from its falling trendline, turning this earlier resistance zone into a solid support base. The stock further continues to trade above all major moving averages, indicating sustained bullish strength.
"The overall technical structure points toward continuation of the uptrend with the next upside target around ₹1,660, says Shukla. This implies a potential upside of around 7.5 per cent from here.
As a trading strategy, the analyst recommends a 'buy on dips' approach for the stock, closer to ₹1,500–₹1,520 zone with a stop loss placed below ₹1,440.
Disclaimer: Views and outlook shared on the stock belong to the respective brokerages and are not endorsed by Business Standard. Readers' discretion is advised.
 "TCS, Infosys, HCL Tech, Tech Mah: Which IT stock is worth your portfolio?")
