BSE IT index hits record high; Wipro, Tech M too scale new peaks

Shares of information technology (IT) companies were in demand on the bourses on Friday with Wipro and Tech Mahindra hitting all-time highs, while Tata Consultancy Services (TCS) and Infosys were quoting close to their respective record highs on the BSE.

Besides Wipro and Tech Mahindra, a total 10 stocks including Mastek, Mindtree, Happiest Minds Technologies, Mphasis and Coforge too hit their new highs in Friday's intra-day deals.TCS, meanwhile, gained 3 per cent to quote at Rs 3,309, while Infosys was up 2 per cent at Rs 1,451.55. TCS had hit a record high of Rs 3,358 on April 9, 2021 and Infosys had touched a high of Rs 1,480 on April 12.

Among other individual stocks, Tech Mahindra hit a record high of Rs 1,082, up 2 per cent on the BSE, surpassing its earlier high of Rs 1,081.35 touched on January 11, 2021. In the past one week, the stock has gained 6 per cent after a Economic Times report suggested that the company is looking for acquisition in Europe to upgrade its capabilities in cloud computing, 5G, SAP and Salesforce. The company is also planning to hire 250 employees in Nordic region over next 18-24 months, the report said.

Share of eClerx Services were also locked in 20 per cent upper circuit band at Rs 1,617.35 on the BSE after the company reported healthy March quarter numbers (Q4FY21) with revenues up 19.3 per cent quarter on quarter (QoQ) in constant currency terms and 19.7 per cent QoQ in reported terms. The stock had hit a record high of Rs 1,775, in August 2016. 

At 01:26 pm, the S&P BSE IT index, the top gainer among sectoral indices, was up 1.4 per cent at 28,680 points as compared to a 0.25 per cent rise in the S&P BSE Sensex. The former hit a record high of 28,810.81 points in today's intra-day deals, surpassing its previous high of 28,385.91 touched on April 12, 2021.

In January-March quarter (Q4FY21), Tier-1 IT Services’ revenue growth was tad lower at 3.7 per cent quarter on quarter (QoQ) USD as compared to previous two quarters. Three out of five tier-1 IT companies reported a miss on revenue estimates.

Yet, analysts at Prabhudas Lilladher continue to be confident of a strong demand environment and believe the miss is only due to moderation of revenue growth post two quarters of strong growth. "Revenue growth was led by strong demand momentum in BFSI and sustained recovery in manufacturing & retail sectors. Communications vertical was weak for all companies," it said in a Q4FY21 result review report.

"Management commentary across board indicated record high deal pipeline and broad-based demand environment characterized by cost take-out and transformation led outsourcing or lift-shift-transform deals and digital and cloud adoption led deals. Consecutive quarters of record hiring (freshers) also indicate strong optimism in demand. Strong hiring trend will continue in FY22," it added.

That apart, analysts continue to remain positive on the Indian IT Sector as they believe sector will continue to trade at higher multiples well supported by improving visibility (strong deal wins, faster ramp up), sustained margins, improving free cash flow (FCF) and improving demand environment across verticals.

Analysts at Edelweiss Securities, for instance, remain confident that like in past three IT upcycles, multiple re-ratings will be sharp in the early phase of this cycle as well, followed by earnings upgrades as the Street plays catch up. The brokerage firm argues the current cycle, in that sense, should not be different either.