Infosys, HCL Tech, TCS stocks rally on cooling US inflation data
- Infosys, HCL Tech, TCS, and other IT company stocks rallied after data showed a cool down in US inflation.
- The Nifty IT index closed the day up 3.8%, while the broader Nifty50 index gained 1.8%.
- Earlier on Thursday, the tech-heavy Nasdaq Composite rallied 7.4% after US inflation data for October came in at 7.7%, down from 8.2% in September.
The Nifty IT index closed the day up 3.8%, while the broader Nifty50 index gained 1.8%. In the first hour of trade on Friday, the top five gainers were all Indian IT majors – with Infosys once again leading the pack.
Analysts say that the cooling US inflation had offered Indian IT stocks a much-needed respite. Tech stocks have been battered in the last few months on account of many factors – mostly external – like fears of recession fuelled by sharp rate hikes by the Fed, totaling 375 basis points in 2022 so far.
On Thursday, US inflation came in at 7.7% for October, down from 8.2% in September – leading to the biggest rally in US markets in two years. While the S&P 500 rose 5.5% on Thursday, Dow Jones rallied 1,200 points to end up 3.7%.
However, it was the tech-heavy Nasdaq Composite, which rallied 7.4%, that has also spurred the Indian IT stocks.
“Going ahead, cost pressures for tech companies as well as manufacturing companies are expected to soften, which will improve their profitability,” Gorakshakar added, explaining that the rally in US markets has had a rub-off effect on stocks of Indian IT companies.
Pricing in US, Europe markets a worry, but slowdown baked into prices
Worries of a slowdown in the key markets of US and EU have reflected in the stock prices of IT majors – Wipro’s share price has tumbled over 44% in 2022 so far, followed by a near 41% decline in Tech Mahindra’s shares.
During an earnings call in October, TCS CEO and MD Rajesh Gopinathan said he expected some softness in deal pricing in Europe.
“We are seeing an increasing caution in discussions with clients. We cannot say that we are totally insulated from it but as we said last quarter, we are vigilant of the environment and focussed on a set of customers,” he said.
Infosys CEO and MD Salil Parekh had struck a note of cautious optimism, saying, “Our view is we are ready in this macro environment for all types of client work. Whether it focuses on digital and growth, or costs.”
The IT major reported its best performance in terms of deal wins in the past seven quarters, with large deals worth $2.7 billion in the September quarter.
HCL Technologies, too, reported better-than-expected earnings and bagged a $625 million worth mega deal during the quarter.
“Most of the large cap Indian IT companies have their largest share of revenue coming from their clients based in the US, so this is positive news that might revive the sector further. (The sector is) already under hope of improving attrition rates and margins upcycle from here on,” said Anmol Das, head of research, Teji Mandi, a subsidiary of Motilal Oswal.
|Company||Current market price||Change||YTD performance|
Source: NSE, market price as on November 11, 2022
$NIFTYIT.NSE After marking a double bottom at 26550 (closing basis), the Nifty IT index gave an Inverse H&S breakout today with a neckline of 29350. If it maintains above 30275 levels in the near future, it will also break substantial resistance.Keep an eye on major $NIFTYIT.NSE stocks like $NAUKRI.NSE $MPHASIS.NSE $INFY.NSE $TCS.NSE and $WIPRO.NSE— (@ankushbajaj) November 11, 2022
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