Coforge, Wipro, TCS, LTTS rally 11% in one month; Nifty IT hits record

The Nifty IT index hit an all time high on Tuesday, reaching 44,244.60 level, up 1.43 per cent intraday. Meanwhile in the last 30 days, the index has surged 5.24 per cent

Shares of information technology (IT) companies have jumped up to 11 per cent over the past month, as the outlook for the sector turned positive due to a confluence of factors, including US President-elect Donald Trump’s return to the White House. 

 

The National Stock Exchange Nifty IT Index reached an all-time high on Tuesday, hitting 44,244.60 intraday before closing at 44,085.95, a 1.07 per cent increase. Over the past 30 days, the index has risen 3.76 per cent, compared to a modest 0.17 per cent gain in the benchmark Nifty 50 index.

 

Among the major stocks, Coforge rallied 11.26 per cent, Wipro rose 7.18 per cent, Tata Consultancy Services climbed 6.35 per cent, and L&T Technology Services soared 5.57 per cent. Other companies, including Infosys, Persistent Systems, LTIMindtree, and HCLTech, saw gains ranging from 1 to 4 per cent over the past four weeks.

 

 

Experts suggest that the IT sector, which had been underperforming until October, is now seeing a turnaround, emerging as a strong choice for investors in an otherwise weak market. The US’ tech-heavy Nasdaq has been performing well, reaching all-time highs, and Indian IT companies are beginning to catch up, albeit with some delay, according to analysts. 

 

“IT had underperformed for a while, particularly due to concerns over large deals not materialising. It continued to lag until the results came in at the end of October, after which it recovered the losses. IT now seems to be a defensive bet, especially as other sectors in India face growth concerns,” said Deepak Jasani, head of retail research at HDFC Securities.

 

Further, analysts believe that with Trump back in power, the banking, financial services and insurance sector in the US is likely to benefit, leading to increased deal flows to Indian IT companies from US firms.

 

They note that Trump’s expansionary fiscal policy, which includes cutting the corporate tax rate to 15 per cent from 21 per cent for domestic production, could positively impact IT services demand by easing budgetary pressures.

 

Moreover, some domestic analysts have turned overweight on the IT sector, as growth in financial services and healthcare showed signs of recovery at the end of the second-quarter earnings season. They also believe that attrition concerns in the IT industry have eased considerably, with companies no longer struggling to find talent at reasonable costs, as was the case a year or a year and a half ago.

 

“We shifted to an ‘overweight’ rating on the IT sector from ‘neutral’ in September. The key reasons for this were the encouraging decision-making cycle, particularly in financial services and healthcare, both of which are showing signs of recovery. We expect that by February, the sales cycle could pick up, potentially resulting in an uptick in contract wins as the decision-making process accelerates,” said Abhishek Shindadkar, equity analyst at InCred Capital.

 

However, Shindadkar added that while margin performance for IT firms will remain under pressure, he does not foresee any earnings downgrades in the near future.