3Why Nifty IT index shot up 2300 points in two days — explained with 4 reasons

Stock market today: Extending its bull trend for yet another session on US Fed rate cut buzz, Nifty IT index touched new life-time high for second day in a row on Friday. On Thursday, Nifty IT index had hit a new high of around 33,260 odd levels while Nifty IT index today climbed to a new peak of 35,655. All IT major like Tata Consultancy Services (TCS), Infosys, HCL Tech Tech Mahindra, Wipro, LTIM, etc. have witnessed huge buying interest in last two sessions.

TCS share price today touched a new peak of ₹3,840 apiece on NSE, Infosys shares shot up from ₹1,449 to ₹1,569 per share levels in last two sessions — logging more than 8 per cent rise in this time, HCL Technologies share price today touched a new peak of ₹1,482.35 per share levels, Tech Mahindra shares hit a new 52-week high of ₹1,324.80 per share levels. Wipro share price was also not a laggard in this rally as it touched a new peak of ₹449.50 apiece on NSE during Friday deals.

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According to stock market experts, IT stocks are rising due to US Fed’s rate cut signal in recently ended US Fed meeting. They said that US Fed rate cut is based on strong US economic data, which means higher business for Indian IT companies. Apart from this, weakness in Indian National Rupee (INR) and strong Us economic data is also doing the trick in favour of Indian IT companies.

Triggers for Indian IT stocks

Experts listed out the following reasons that is fueling Indian IT stocks these days:

1] US Fed rate cut signal: “After US Fed’s signal to cut US Fed rates thrice in 2024, growth stocks have come under the radar of stock marekt bulls. As IT is one of the growth segments whic hasn’t yer participated in recennt bull trends, investors are pumping money behing IT majors like HCL Tech, Infosys, TCS, LTIM, TechM, etc.,” said Saurabh Jain, Vice President — Research at SMC Global Securities.

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2] Strong US economic date: Strong US economic data is also a reason for buying trigger in IT stocks. Last week, we came across better-than-expected US job data, which eased the pressure on the US Federal Reserve in combating inflation. Even though, US Fed has miles to go in its battle against inflation, but strong US economic data has signaled rise in demand in the US economy. As Indian IT companies draw a handsome business bolume from the US, market is expecting rise in busines volume of the Indian IT majors in upcoming quarters,” said Avinash Gorakshkar, Head of Research a Profitmart Securities.

3] Weak Indian Rupee: Avinash Gorakshkar of Profitmart Securities also said that weakness in rupee is also a reason for rise in Indian IT majors as IT companies get payment in US dollar. As Indian Indian Rupee has been nosediving for the last few quarters, Indian IT companies are getting benefit of this scenario as it is helping them improve their margins.

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4] FII’s buying: “In the wake of US Fed rate cut buzz, US dollar and US treasury yields are expected to come down. In such case, FIIs are expected to fish out their money from currency and bond markets and move towards other assets including equities. As Indian equity market is one of the emerging markets where they may park their money, Dalal Street is expecting that money to come at Indian markets. IT and banking has remaiend one of the most favourite segments for FIIs and in the wake of value buying, market is expecting FIIs’ buying in IT stocks as well,” said Saurabh Jain of SMC Global Securities.

Outlook for Nifty IT index

On outlook for Nifty IT index, Sumeet Bagadia, Executive Director at Choice Broking said, “Nifty IT index has given breakout at 33,500 levels and the index has risen to the tune of near 2300 points in last two days. If it manages to sustain above 33,500 levels on closing basis, we can expect some more upside in the index.”

Ganesh Dongre, Senior Manager — Technical Research at Anand Rathi said, “Nifty IT index is facing hurdle at 36,900 levels whereas it has immediate support placed at 33,500 levels. On breaching 36,900 levels we may expect the index to touch 39,200 levels by end of March 2024.”

On IT stocks to buy, Saurabh Jain of SMC Global Securities said that one can bet on HCL Tech, Infosys and TCS as it would large-cap stocks that would first benefit from above mentioned triggers.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decision.: