In the latest stock market session, the Nifty IT index continued its bullish trend, reaching a new all-time high for the second consecutive day. After hitting a record high of around 33,260 on Thursday, the Nifty IT index surged to a new peak of 35,655. Major IT companies such as Tata Consultancy Services (TCS), Infosys, HCL Tech, Tech Mahindra, Wipro, and LTIM experienced significant buying interest during these two sessions.
TCS shares reached a new high of ₹3,840 on the NSE, Infosys shares rose from ₹1,449 to ₹1,569 in the last two sessions, marking an increase of more than 8%. HCL Technologies touched a new peak of ₹1,482.35 per share, Tech Mahindra reached a 52-week high of ₹1,324.80 per share, and Wipro’s share price touched a new peak of ₹449.50 on the NSE.
Market experts attribute the rise in IT stocks to signals of a US Fed rate cut in the recently concluded US Fed meeting. They believe that the rate cut is based on robust US economic data, indicating increased business for Indian IT companies. Additionally, the weakness in the Indian National Rupee (INR) and strong US economic data are contributing to the positive momentum for Indian IT companies.
Several factors are fueling the surge in Indian IT stocks:
1. **US Fed Rate Cut Signal:** The US Fed’s indication of potential rate cuts in 2024 has attracted investors to growth stocks. As the IT sector, considered a growth segment, has not participated significantly in recent bull trends, investors are directing funds towards major IT companies like HCL Tech, Infosys, TCS, LTIM, TechM, etc.
2. **Strong US Economic Data:** Better-than-expected US job data has eased pressure on the US Federal Reserve in managing inflation. The strong US economic data signals increased demand in the US economy, benefiting Indian IT companies that draw a substantial business volume from the US.
3. **Weak Indian Rupee:** The depreciation of the Indian Rupee against the US dollar is advantageous for Indian IT companies as they receive payments in US dollars. The weakness in the INR has been aiding these companies in improving their profit margins.
4. **FII Buying:** In anticipation of a US Fed rate cut, a decline in US dollar and treasury yields is expected. This could lead Foreign Institutional Investors (FIIs) to reallocate their funds from currency and bond markets to other assets, including equities. With IT and banking being favored segments for FIIs, there is an expectation of increased buying in IT stocks.
Regarding the outlook for the Nifty IT index, experts suggest that if it sustains above 33,500 levels on a closing basis, further upside can be expected. Technical analysis indicates a hurdle at 36,900 levels, with immediate support at 33,500 levels. A breach of 36,900 levels could potentially lead the index to touch 39,200 levels by the end of March 2024.
For potential stock investments, HCL Tech, Infosys, and TCS are identified as large-cap stocks that could benefit from the mentioned triggers.
