IT Stocks Rally As Companies Remain Bullish on Growth Prospects; L&T Infotech, Tech M Top Gainers

Shares of Indian information technology majors rose in the intraday trade on Monday after companies continued to reiterate their confidence in growth at recent meetings with analysts. Information technology companies have come under pressure this year on concerns that a deep slowdown in the US and European economies could constrain the scorching growth trajectory these firms saw in 2020 and 2021.

Santosh Meena, Head of Research, Swastika Investmart Ltd, said: “IT stocks are seeing some bargain buying after a healthy correction. Indian markets are near their all-time high however IT stocks are trading much below their 52-week highs therefore we are seeing some buying at lower levels. The leadership is in the hand of the domestic economy facing sectors like financials, auto, and industrials but there is some sectorial rotation ahead of new highs in the market. FIIs are in buying mood and they are showing some interest in beaten-down IT names as global cues are also improving.”

The Nifty IT index gained 1.76 per cent to 29,229.15, extending its gaining streak for the fourth session. The index advanced 5.36 per cent in four trading sessions.

Larsen & Toubro Infotech (up 2.79 per cent), Tech Mahindra (up 2.36 per cent), Mindtree (up 2.34 per cent), Infosys (up 2.08 per cent), Wipro (up 1.46 per cent), HCL Technologies (up 1.42 per cent), Coforge (up 1.38 per cent), Tata Consultancy Services (TCS) (up 1.18 per cent), Mphasis (up 1.1 per cent) and L&T Technology Services (up 0.85 per cent) edged higher.

Bullish on Growth Prospects Going Forward

Infosys management in a conversation with analysts from BofA Securities and Citigroup India has reiterated its confidence in meeting its revenue guidance for 2022-23. Infosys had guided for 14-16 percent growth in revenues in constant currency terms in 2022-23. Further, the IT major also highlighted that supply-side challenges have likely peaked and therefore, the worst of the attrition among employees may be over.

Brokerage firm Citigroup India said that Infosys’ margins for 2022-23 could likely meet the lower band of its 21-23 per cent guidance.

Analysts said that the IT firms confidence is also in tandem with receding concerns over a deep recession in the US. The difference between the 2-year and 10-year US treasury bonds, a key indicator of recession in the US, has narrowed sharply in recent weeks amid a roaring labour market in the country.

Investors bought shares of other IT companies on the perception that Infosys’ outlook on revenues and margins will likely be echoed by other firms when they report their September quarter earnings next month.

Speaking about the performance of IT stocks going forward, Kush Ghodasara, CMT independent market expert, said that “IT stocks move is directly related to NASDAQ movement. US stocks have a made a bottom last week and shown some positive divergence which is also seen in CNX IT. Looking at the value buying around the world in IT sector, we can expect momentum too. Stocks like WIPRO, Coforge , Techm have corrected 50 per cent from highs and technically too they are ready for a furious bounce back.”

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