As the BSE Sensex hit an unprecedented milestone, soaring past the 71,000-point mark, the Nifty IT index mirrored this success, reaching a new record high for the second consecutive day, breaching 2,300 points since Wednesday. The surge in both indices can be attributed to the remarkable performance of IT company shares.
Driving Forces: TCS, Infosys, Wipro, and HCL Technologies Lead the Charge
The Nifty IT index’s significant achievement was propelled by the stellar performance of key Indian tech giants—Tata Consultancy Services (TCS), Infosys, Wipro, and HCL Technologies. These companies experienced a substantial spike in their share prices over the last two market sessions, contributing to the overall record growth of the Nifty IT index.
In particular, TCS witnessed a record-high share price of ₹3,840 on the NSE, while Infosys marked impressive growth, reaching ₹1,569 per share in the same period.
Understanding the Surge: Why IT Company Stocks are Rising
The surge in IT company stocks can be linked to the buzz surrounding the US Federal Reserve’s hinted rate cut, discussed during their recent meeting. The potential rate cut is contingent upon the economic state of the United States. A robust US economy translates to increased business for Indian IT companies, as they draw in global partners.
Furthermore, the strengthening value of the US Dollar against the Indian National Rupee (INR) is favorably impacting the share prices and valuation of Indian IT companies. Given their strong business connections with global firms, primarily based in the United States, these companies stand to benefit if the US economic data remains strong and the US dollar continues to gain ground.
Sensex Milestone: Crossing the 71,000 Mark
In a historic moment for the Indian stock market, the BSE Sensex achieved an all-time high by crossing the 71,000 points mark. During the morning trade, the 30-share BSE Sensex surged by 569.88 points, reaching an unprecedented peak of 71,084.08.
Unpacking the Reasons: Triggers for Indian IT Stocks
1. US Fed Rate Cut Signal: The US Federal Reserve’s indication of three rate cuts in 2024 has brought growth stocks into focus. Investors are directing funds toward growth segments like IT, leading to increased investment in major players such as HCL Tech, Infosys, TCS, and others.
2. Strong US Economic Data: Better-than-expected US job data alleviated pressure on the US Federal Reserve to combat inflation. Strong US economic data signals increased demand, benefiting Indian IT companies that draw substantial business from the US.
3. Weak Indian Rupee: The depreciation of the Indian Rupee has favored Indian IT majors, as they receive payments in US dollars. The decline in the Rupee improves margins for these companies.
4. FII’s Buying: In anticipation of a US Fed rate cut, foreign institutional investors (FIIs) are expected to shift their funds from currency and bond markets to equities. The Indian equity market, particularly IT and banking segments, remains attractive for FIIs, leading to an expected influx of funds.
Outlook for Nifty IT Index: What Lies Ahead
Experts weigh in on the outlook for the Nifty IT index, with Sumeet Bagadia from Choice Broking highlighting a breakout at 33,500 levels and potential upside if sustained. Ganesh Dongre of Anand Rathi sees a hurdle at 36,900 levels but anticipates further growth, projecting levels of 39,200 by the end of March 2024.
Top Picks: HCL Tech, Infosys, and TCS
For those eyeing IT stocks, Saurabh Jain of SMC Global Securities recommends considering large-cap stocks such as HCL Tech, Infosys, and TCS. These companies are positioned to benefit from the triggers driving the current surge in the IT sector.
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