IT stocks were in focus today as TCS, Wipro, Infosys and Mindtree shares hit fresh 52-week highs on Monday. BSE Information Technology index rose 3.32 per cent to climb up to a new record high. During the second quarter of FY21, BSE IT index surged 31.7 per cent, significantly outperforming BSE Sensex, which managed to gain 9.2 per cent. Corporate earnings for the July-September quarter will kick start from Wednesday as TCS is scheduled to announce its second-quarter results. Analysts expect Q2 to be a strong quarter for Indian IT companies as all the companies successfully transitioned to ‘work from home’ (WFH) model leading to business continuity and significant cost savings.
From March lows of 10,937.37, BSE IT index has rallied over 90 per cent. In today’s session, TCS shares soared 5 per cent to hit a fresh 52-week high of Rs 2,649.95, Infosys shares jumped 3 per cent to Rs 1,054.60, Wipro gained 5.5 per cent to Rs 330.45 apiece. While Mindtree shares added 2.73 per cent to touch a new 52-week high of Rs 1,373.65 apiece and Coforge hit Rs 2,438.95 as new 52-week high. “Amid the pandemic, the IT sector has seen a good pick-up in demand for digital solutions resulting in improvement in the growth outlook for most of the companies within the sector,” IDBI Capital said in a note. This has reiterated the sector’s ability to deal with headwinds which coupled with strong FCF profile/payouts and corporate governance has resulted in re-rating of the sector.
Amongst the large-caps, the research and brokerage firm forecasts revenue growth of between 1.7% and 3.9% QoQ in CC terms with HCL Technologies (HCLT) outperforming its peers. It forecast Tata Consultancy Services (TCS) to report the best improvement in EBIT margin (+185bps QoQ to 25.5%). It also expects Wipro to kick-start the share buyback for FY21.
HDFC Securities in its 2QFY21E results preview report said that the IT sector is expected to bounce back. “Despite the recent outperformance/re-rating, we remain positive on the sector based on growth longevity and acceleration, and resilient service portfolio even in an extended pandemic scenario,” it added. The brokerage firm expects tier-1 IT to deliver revenue growth backed by strong deal flow and improvement in execution.
In the BSE IT pack, BirlaSoft, Mastek, Wipro, Cigniti Technologies, NIIT Ltd were trading higher in the range of 4.7-7 per cent. HDFC Securities has given ‘add’ rating to TCS, Wipro and Mindtree. On the other hand, it has a ‘buy’ rating to Infosys and HCL Technologies.
Around 10.15 AM, BSE Sensex was trading 421 points or 1.09 per cent higher at 39,118, while the broader Nifty 50 index was up 1 per cent at 11,532.