IT Stocks Rally: Why did Nifty IT surge over 2% despite Sensex and Nifty 50 falling sharply?

Information technology stocks witnessed buying interest on Monday, helping the Nifty IT index rise more than 2 per cent even as the broader equity market remained under pressure and benchmark indices Sensex and Nifty 50 traded lower by nearly 1.4 per cent.

The Nifty IT index climbed 612.90 points, or 2.21 per cent, to 28,329.80 during the session. The index had a previous close of 27,716.90 and rose to an intraday high of 28,358.85 during Monday’s trading session. The index gained 641.95 points from the previous closing level to the day’s high

The sectoral index, however, remained significantly below its 52-week high level of 40,301.40. Based on current levels, the Nifty IT index is down around 11,971.60 points, or nearly 29.70 per cent, from its 52-week high. The index had touched a 52-week low of 27,078 earlier.

Benchmark indices remain under pressure

The broader market traded weakly during the session. The Nifty 50 declined 69.75 points, or 0.30 per cent, to 23,573.75. During intraday trade, the benchmark index slipped to a low of 23,317.10.

Based on the previous closing level of around 23,643.50, the Nifty 50 fell about 326.40 points, or nearly 1.38 per cent, from the previous close to the day’s low.

The Sensex also remained under pressure. The 30-share index had a previous close of 75,237.99 and slipped to an intraday low of 74,180.26. This marked a decline of about 1,057.73 points, or nearly 1.41 per cent, from the previous close to the day’s low.

Rupee weakness supports IT shares

The rupee weakened against the US dollar on Monday and slipped to a record low of 96.25 against the US dollar in early trade. A weaker rupee is considered positive for information technology companies because a large portion of their revenue comes from overseas markets, especially the United States.

Dollar-denominated earnings translate into higher revenue in rupee terms when the domestic currency depreciates.

Technology shares gained after continued weakness in the rupee and positive trends in US technology stocks. Indian IT companies derive a significant share of their revenue from clients in overseas markets, particularly the United States.

Strength in software and technology stocks on Wall Street is considered positive for Indian IT companies because it reflects continued spending in technology-related services and digital operations.

Coforge, Tech Mahindra lead gainers

Shares of Coforge rose 4.91 per cent and emerged as the top gainer in the Nifty IT pack. Tech Mahindra climbed 4 per cent, while Persistent Systems advanced 3.68 per cent.

Oracle Financial Services Software gained 3.36 per cent, and LTIMindtree moved up 2.84 per cent. Mphasis rose 2.82 per cent. Infosys advanced 1.89 per cent, while HCL Technologies added 1.15 per cent.

Wipro gained 1.07 per cent during the session. Tata Consultancy Services also traded higher and rose 0.82 per cent.

The BSE Focused IT index also reflected gains in technology shares. The index rose 757.49 points, or 2.28 per cent, to 33,974.58.

The Nifty Media IT Telecom index traded 1.06 per cent higher at 8,926.80. The Nifty IT index has remained under pressure over the longer term despite Monday’s gains.

Nifty IT remains weak in longer-term period

The sectoral index has declined 3.40 per cent in one week, 10.93 per cent in one month, and 13.27 per cent in the last three months. It has fallen 21.24 per cent in six months, 25.78 per cent on a year-to-date basis, and 25.39 per cent over one year.

Indian IT companies are also investing in artificial intelligence capabilities, cloud migration, digital transformation services, and data management.

Market participants tracked gains in major information technology companies, including Infosys, Tata Consultancy Services, Wipro, HCL Technologies, Coforge, Persistent Systems, and Tech Mahindra during the trading session.

The gains in technology shares came even as broader domestic equity markets traded lower during the day.