The Nifty IT index, which surged to highest levels since May last year, closed at 31,434 on Thursday, up 1.62% over the previous day. The Nifty ended at 18,038, up 20 points or 0.11% after rising 0.66% in the morning trade. The Nifty IT index has gained 3.8% in the past three days.
India’s largest tech services player Tata Consultancy Services (TCS) rose 0.8% to hit a nine-month high on Thursday. Shares of Tech Mahindra surged over 5% with over eight times its average daily volume of the past month. The stock has risen more than 11% in the last two sessions.
Analysts said better-than-expected third-quarter earnings, positive commentary and deal wins in a challenging environment have given a boost to investor sentiment.
“We expect the demand for IT services to remain resilient and Indian IT companies to gain market share as enterprises remain focussed on digital transformation spending and prioritise cost saving projects to fund them,” said Kumar Rakesh, IT & automobile analyst, and vice president – research, BNP Paribas Securities India.
Rakesh explained that investors were concerned that the third quarter – considered to be seasonally weak – to be muted given the macroeconomic uncertainty and higher furloughs.
Valuations now appear attractive and are at par with their last five-year average, making the investment case favorable for the sector, he said.”Third-quarter earnings saw IT companies meet revenue expectations and surpass estimates on margins. Management commentary was also cautiously optimistic and deal wins robust. This gave a boost to investor sentiments,” said Rakesh.
Investors have been wary of buying aggressively in IT stocks on worries about a recession in the US and Europe. Most of the software services exporters get most of their revenues from these developed markets. In December, the IT index had retreated 10%. A big chunk of that fall came on December 9, when India’s third-largest tech services company HCL Tech warned investors of growth pangs and pricing pressures, perhaps emphasizing the larger problem of tech-slowdown and reduced spending.
Analysts said some of the recent economic readings in the US have eased concerns about the prospects of Indian IT companies.
On Thursday, LTIMindtree advanced as much as 4.3% to its highest level in two months and MphasiS (4.8%) logged its single biggest day gain in two months to close at its highest since August 2022.