Nifty IT jumps 2%; TCS, Infosys, HCL Tech, Tech Mahindra all in green. Why are IT stocks rising?

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IT stocks, including TCS, Infosys, HCL Tech, and Tech Mahindra, traded with healthy gains in early trade on Friday, June 7, boosting their sectoral index, Nifty IT.

The Nifty IT index was 2 per cent up, while the equity benchmark Nifty 50 was 0.5 per cent up at 9:40 am.

Shares of Wipro, Mphasis and Coforge and Persistent Systems were almost 4 per cent, while those of Infosys, Tech Mahindra, HCL Tech and TCS were up 1-2 per cent at that time.

The IT pack has been in the green for the last three consecutive sessions. On June 5, the index jumped 2.39 per cent, and on June 6, it gained 2.83 per cent.

Experts say most IT stocks are gaining as investors rotate money and play defensive due to the uncertainty surrounding the new government formation.

“Most market participants are trying to be defensive because of uncertainty on the government formation front. While it is clear that the BJP-led NDA will form the government, it is not clear yet who will get which ministry. In times of uncertainty, defensive sectors tend to gain,” said Avinash Gorakshkar, Head of Research at Profitmart Securities.

Gorakshkar also observed some green shoots in the US and Europe, which are helping IT stocks and investors anticipate some value emerging in the sector. However, this is just a small beginning, not a trend confirmation. Gorakshkar believes a clear trend for the IT sector will emerge only after the June quarter earnings and management commentaries on the demand outlook.

Saurabh Jain, vice president of research at SMC Global Securities, underscored that investors are moving their money from overbought to discounted segments amid market volatility. This boosts defensive segments like IT, FMCG, auto, and pharma.

Also Read: Persistent, Coforge to HCL Tech: Why are IT stocks skyrocketing?

The Indian IT sector has been under pressure due to the gloomy demand environment in its key markets. Some analysts observe green shoots emerging.

According to brokerage firm Antique Stock Broking, the demand scenario could remain muted in the short term, largely due to the conservative tech spending of US BFSI clients. However, promising signs of recovery are emerging, such as recent strong deal bookings, which are expected to fuel the growth of Indian IT players in the medium to long term.

Also Read: IT sector demand may be muted in short term, but Infosys, TCS, HCL Tech among top buys, say experts

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Disclaimer: The views and recommendations above are those of individual analysts, experts, and brokerage firms, not Mint. We advise investors to consult certified experts before making any investment decisions.

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Published: 07 Jun 2024, 09:52 AM IST