It’s been a choppy Friday for the markets so far. The Nifty and Sensex tumbled hard in the morning trade but recovered some ground eventually. The Nifty 50 dropped well past the 23,500 support zone and slipped to 23,344.35. But then recouped back above this key support level. The Sensex too fell 500 points before shifting gears to green. One of the key reasons for mid-morning recovery was the stupendous run in the tech space. The Nifty IT index is up nearly 4% and TCS is up 6%. The stocks that are pulling the Nifty up include TCS, Tech Mahindra, Wipro, Infosys, and HCL Technologies.

4 reasons IT stocks are surging in a volatile market

Here is a quick analysis of the key reasons that helped the IT stocks clock smart gains amidst volatile market movement-

1. TCS upbeat on demand pick-up, discretionary spend

The surge in the index came after TCS’s Q3 earnings report highlighted demand pick-up and revival in discretionary spending. Brokerages are bullish on the company on strong deal wins, discretionary spending, and positive management commentary on growth. For most, the demand commentary improving materially with a sharp pick-up in its order book is one of the biggest positives. Additionally, the company’s focus on AI is seen as another key positive for demand ahead.

2. Expectation of IT Sector being resilient

The TCS earnings have been a sentiment booster for the ITIndex. In fact, the Nifty IT Index is among the few sectoral indices that’s up firmly in the green amidst choppy trade. Even an analysis of the stocks that are up smartly includes an array of IT stocks. The Nifty IT Index is among the top gainers. In a 6-month timeframe, The Nifty IT Index is up nearly 20% and it has yielded over 28% return over 1 year.

According to V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services, “Since the results season has started the market will witness lots of stock-specific action in response to the results. Results of TCS indicate that the IT sector will continue to remain resilient.”

3. HCL Tech rolls out salary hikes

In the action from other key IT stocks, HCL Tech rolled out salary hikes yesterday. Reports on MoneyControl indicated that HCL Tech has given a 1-2% salary hike to junior employees in the October-December quarter. Interestingly many other IT bellwethers have postponed salary hikes to Q4.

4. Infosys, Wipro, HCL Tech Q3 earnings next week

Top IT majors, Infosys, Wipro, and HCL Tech are likely to report numbers next week. The TCS management highlighted improved decision-making driven by shorter deal cycles and early signs of revival in discretionary spending. This augurs well for investors and makes them hopeful about the prospects for the upcoming numbers favourable. Moreover, Accenture also raised its revenue outlook last month. These have indications about better deal flow and widespread generative AI adoption by IT majors.

All in all, the stocks are responding to improved business outlook expectations. The street is expecting the IT stocks to be resilient despite muted earnings performance on the prospect of better deal wins and greater adoption of AI. All eyes are now on US President-elect Donald Trump’s policies going forward. Per se, it is expected that the upcoming Govt will be favourable for the IT industry. That optimism is also reflected in the stock movement.