Wipro, TCS: These IT stocks can soar 15% despite being in 'overbought' zone

While Wipro does show some weakness, the overall trend, so far, has not been dented by the selling pressure

The Nifty IT index was ruling nearly a per cent higher on Monday, bucking the overall weak trend in the markets. At 12:14 PM, the index was at 35,032 levels, up 0.6 per cent, as against a 0.23 per cent dip in the benchmark Nifty50 index. Individually, shares of Mindtree were up 3 per cent while Mphasis, Coforge, Wipro, and TCS (Tata Consultancy Services) gained between 0.7 per cent and 2.2 per cent.

According to analysts at Phillip Capital, the sector will continue to see re-rating in the near to medium term. "We believe current valuations will sustain driven by liquidity + TINA (there is no alternative) + FOMO (fear of missing out) factors. Also, with pricing power returning, IT-services sector is closing in on FMCG fundamentals. Lastly, mid-caps will continue to trade at a premium to

large-caps in the near to medium term, driven by a never-before outperformance in revenue growth relative to large-caps for at least the next two years," they said in a report dated September 8.

Here's how the stocks look on charts:

NIFTY IT INDEX
Likely target: 36,500 to 37,000
Upside potential:  4% to 5.50%

The Nifty IT index has doubled in one year and continues to scale higher levels with sentiment remaining extremely positive. For a short-to-medium term, as long as the support of 33,600 is maintained, the upside bias may see the index climb to 36,500 to 37,000 levels, as per daily and weekly charts. An immediate support for the index can be expected around 34,200-level. CLICK HERE FOR THE CHART
 
Tata Consultancy Services (TCS)
Likely target: Rs 4,250
Upside potential:  10%

Since the beginning of August, the shares of Tata Consultancy Services have surged over 20 per cent. The counter is able to absorb all the selling pressure even in the overbought category of Relative Strength Index (RSI), sustaining the bullish outlook. The overall trend heads towards Rs 4,250 levels, according to the daily charts. Until the support of Rs 3,700 is held on a closing basis, the upside bias is likely to see added interest of market participants. CLICK HERE FOR THE CHART
 
Wipro Ltd (WIPRO)
Likely target: Rs 720 and Rs 750
Upside potential: 7% to 11%

The counter has seen a bullish momentum in the overbought category of RSI. While it does show some weakness, the overall trend, so far, has not been dented by the selling pressure. The stock continues to scale higher levels, building firm support. The current support comes at Rs 640 and Rs 625 and the trend reflects a rally towards Rs 720 and Rs 750 levels, as per the daily chart. ' CLICK HERE FOR THE CHART
 
Larsen & Toubro Infotech Limited (LTI)
Likely target: Rs 6,000
Upside potential:   10%

After conquering the resistance of Rs 4,500-level, the shares of Larsen & Toubro Infotech Limited have not looked back, as per the daily chart. The stock is gradually rising upward in the overbought category of RSI, suggesting a firm underneath strength. Such momentum reflects a positive upside in the direction of Rs 6,000-level. The closing basis support remains at Rs 5,250 levels. CLICK HERE FOR THE CHART

Coforge Ltd (COFORGE)
Likely target: Rs 6,000
Upside potential:  15%

The stock is observing mild selling pressure above Rs 5,250-level. Once this resistance gets surpassed, the bullish sentiment may breakout towards Rs 6,000-level. The counter trading sideways hints that an upward rally may result in a breakout, as per the daily chart. The closing basis support stays at Rs 5,000-level.  CLICK HERE FOR THE CHART
 
MindTree Limited (MINDTREE)
Likely target: Rs 4,300 and Rs 4,450
Upside potential: 10% to 15%
 
The stock has doubled in the last six months and continues to hold the positive momentum. The price structure indicates a formation of "Higher High, Higher Low" pattern, which has a support at Rs 3,600-odd levels. The current trend suggests a rally towards Rs 4,300 and Rs 4,500 levels. The immediate closing basis support stays at Rs 3,750-level, according to the daily chart. CLICK HERE FOR THE CHART