IT stocks log biggest gain in four months on Infosys buyback, Fed hopes

IT stocks rose sharply with Infosys surging 5% on its buyback plan, lifting the Nifty IT index 2.8%, as Fed rate cut speculation and rupee weakness boosted sector sentiment

Shares of information technology (IT) companies rose on Tuesday, led by a 5 per cent jump in Infosys on the back of its buyback plan. Infosys, in an exchange filing on Monday after market hours, said its board will consider a proposal to buy back its shares on Thursday. 

 

The Nifty IT index rose 2.8 per cent, the highest since May 12. Infosys was the best-performing Sensex stock and the single biggest contributor to Sensex gains.

 

Infosys, TCS, and HCLTech contributed the most to the index’s gains.

 

Analysts said Infosys has underperformed its largecap peers this year, and the buyback announcement signals stability that could help rerate its multiples. On a year-to-date basis, Infosys’ stock has declined 23.8 per cent.  

 

 

The rupee depreciation and rising bets of a US rate cut after the recent jobs report also supported a rise in IT stocks.

 

The US nonfarm payrolls report released last week showed that 22,000 jobs were added in August, against 79,000 in July and the 75,000 expected by analysts polled by Bloomberg. 

 

A rate cut in the US is positive for Indian IT firms, which earn a significant portion of their revenue from the US, as it could revive technology spending. Moreover, rate cuts in the US are positive for emerging markets like India, making them more attractive to foreign investors.

 

Despite the gains on Tuesday, analysts remain sceptical of the sustainability of the rally in IT stocks.

 

“The rally was on account of the buyback announcement by Infosys. The other IT majors are also known for periodic buybacks. However, whether they will pursue repurchases this time remains to be seen. Buybacks have lost their sheen after the gains are charged in the shareholders' hands. Nonetheless, the rally will likely fizzle out because the tariff threat remains unresolved. Unless there is an amicable solution to the tariff war, IT stocks are likely to underperform,” said G Chokkalingam, founder of Equinomics. 

Nifty gains for fifth day  The Nifty 50 extended its winning streak to a fifth straight session on Tuesday with IT stocks joining the party. The index added 95.5 points, or 0.4 per cent, to close at 24,869. Over the past five trading sessions, the Nifty has added 289 points, or 1.2 per cent. Hopes of a US rate cut and reduction in goods and services tax on several everyday items has boosted risk appetite. The Sensex rose 314 points, or 0.4 per cent, to 81,101. Breadth stayed weak with 1,996 gainers versus 2,127 losers, while the broader indices lagged as the Nifty Midcap 100 rose 0.18 per cent and the Nifty Smallcap 100 rising 0.34 per cent. Foreign portfolio investors bought shares worth ₹2,050 crore on Tuesday, provisional data showed.  

Amanta Healthcare shares up 12.5% on debut 

Shares of Amanta Healthcare, a medical devices maker, rose 12.5 per cent during their trading debut on Tuesday. The stock ended at ₹141.75, up ₹15.75, or 12.5 per cent, over the issue price of ₹126. At the last close, the company was valued at ₹550 crore.