“Softer-than-expected US inflation data and easing bond yields have brought optimism that spending will emerge…in technology,” said Vinod Nair, head of research at Geojit Financial Services. “Taking the cues further, IT stocks have shown a significant jump in the broader market.” The Nifty IT Index gained 2.7% on Thursday’s trade, and 5.06% in the last week of trade, showing signs of recovery in the prices of IT stocks. Infosys, TCS, and HCL were up by about 2.5% on Thursday while Mindteck, Cybertech, and Coforge gained between 7-17% in a single day.
The US consumer price index remained unchanged month on month and rose 3.2% on year in October, both lower than what economists had forecast, sparking a stock market rally after the numbers were published on Tuesday on hopes that the Federal Reserve may stop raising interest rates. This helped Nasdaq, the tech-heavy index for the US, cross 14,000 levels for the first time after September 1 this year. In India, Infosys, which has gained 5.2% in the last two days, has fallen 9% over the last one year, as IT stocks saw major downgrades post Covid-19 due to slower demand globally. Similarly, TCS has gained 5% in two days and HCL reached a 52-week high on Thursday after gaining about 4% since Tuesday. TCS and HCL have gained 4.42% and 20.18% in the last one year, respectively. “Valuations of these stocks are fair since they have seen some downgrades in the past few months, and as long as global factors are conducive, these stocks could also run up further,” said Andrew Holland, CEO of Avendus Capital. He believes the stocks may have run up because of some short covering in the market.
AgenciesIn September, Morgan Stanley had upgraded the rating for HCL Tech, LTIM, Infosys and TCS among large-caps and Cyient and Mphasis among mid-caps. This was due to a strong outlook on FY25 revenue growth, improving margins for these companies, and double-digit earnings per share growth.
Nair of Geojit said, “The market is sensing that export-based sectors like IT could be future winners.”
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