Produced by: Aakanksha Ram Chaturvedi Designed by: Manoj Kumar
Major Indian IT companies like TCS, Infosys, Mphasis showed positive momentum this week. IT services shares were in demand after the tech-heavy index NASDAQ posted its biggest daily percentage gains since April 27 in the overnight trade.
The NASDAQ index showed positive momentum because softer-than-expected inflation data supported the view that the Federal Reserve may pause or slow down raising interest rates. Data showed that the US consumer prices were unchanged in October.
In the 12 months through October, the CPI climbed 3.2 per cent. This was below economists' estimates, that too after rising 3.7 per cent in September, according to a Reuters report. The softness of inflation indirectly led to positive movement in the tech heavy NASDAQ.
NASDAQ’s momentum also trickled down to the BSE IT Index. The S&P BSE IT index shot up 2.04 per cent to settle at 32,022.51 levels on Wednesday. The top five Indian IT companies, TCS, Infosys, Wipro, HCL Tech, and Tech Mahindra, traded in the green.
The positive movement was not limited to just large cap IT players. Small cap and mid cap IT companies also showed momentum. Quick Heal Technologies went up 5 per cent and Mphasis went up 5.53 per cent.
Brokerage houses also showed their interest in the Indian IT space. Analysts from IDBI capital said that they expect mid cap IT players to outperform large cap companies. The report said, “We expect mid-caps to continue to outperform large caps (considering their diversified presence, which will make them more susceptible to macro shocks across sectors).”
A report by Kotak Institutional Equities noted that mid and small cap firms are better positioned from their large cap peers. TCS, Infosys, HCLTech, and, in select cases, LTIM, Mphasis, and Coforge are better positioned. Wipro and Cognizant Technology Solutions are vulnerable, the analysts said.
Despite the ongoing positive momentum, brokerages are also advising to have a cautious approach. Analysts from Kotak also noted that earnings calls commentary of US and European BFS firms indicates a continuing focus on expense management. This can lead to cut backs on tech budgets, which would impact the Indian IT sector.