The Nifty IT index, which got a boost after a softer inflation print in the US, rallied over five per cent in the past two sessions. However, on Friday (November 17), the IT index traded flat with a negative bias.

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Last, at around 2:23 pm, the Nifty IT was down by 0.18 per cent to 32,216.45. The index's 52-week high level stands at 33,402.75. This implies that its current level is over 3 per cent below its 52-week high mark.

In the past 30 days, after earnings and amid global headwinds, while Nifty IT has scaled higher by 1.5 per cent, some of its constituents have gained up to 13 per cent. Midcap IT stocks, including the likes of Persistent Systems and Coforge, have been the star performers, gaining 12 per cent and 12.63 per cent, respectively.

“The recent upside is spurred by the hope that the Fed will pause interest rate hikes due to a more than-estimated fall in inflation, which is positive and leads to a knee-jerk reaction. We do estimate a gradual change in industry outlook over the next 2-3 quarters, led by cost optimisation measures and new deal wins from the new technologies. An uprise in the US economy is the key, which today is in a slowdown mode before stabilising. We suggest an accumulation strategy for large-cap IT companies,” opines Vinod TP, research analyst at Geojit Financial Services.

Outlook for the sector

In its Q2 FY24 results review note, IDBI Capital said the revenue outlook for the IT companies looks muted in the near-term considering furloughs in Q3 and budgeting in Q4. Cancellations, delays, and reprioritisation continue to impact discretionary spending.

“We had a neutral rating on the sector, which continues for the time being as industry guidance for FY24–25 has been reduced and valuations are above the long-term average. Tech spending is forecast to remain dull, negating a change in the industry outlook,” added Vinod TP.

What do technicals suggest for IT stocks?

The Nifty IT index has conquered the 50-simple moving average (SMA) post volatile 20 sessions, recouping the positive strength. If the current momentum succeeds in maintaining the upward bias, the index could set a new all-time high from a medium-term perspective, notes Avdhut Bagkar, Derivatives & Technical Analyst, StoxBox.

Stocks such as HCL Tech and Persistent Systems have already reached a new historic peak, propelling them to a top position in the IT segment. Both of these stocks have moved into new territories following a robust accumulation and building a resilient support base. HCL Tech is headed towards Rs 1,500, while Persistent Systems could see a gradual move to the Rs 7,000 level.

Coforge is another stock poised to hit a new historic peak, and once that occurs, a fresh up move towards Rs 6,000 cannot be denied.

Among IT stocks, Wipro continues to trade with a sluggish bias and needs to scale significant highs to regain the losing sentiment, the analyst added.