HCL Tech and L&T Infotech were up in the range of 2.5-3.5 per cent, and touched new highs of Rs 737.40 and Rs 2,508.80, respectively.
Nifty IT index hit a fresh 52-week high of 18,671.75 on Tuesday with its all 10 index constituents HCL Tech, L&T Infotech, Naukri, Coforge, Infosys, Wipro, Tech Mahindra, TCS, Mphasis and MindTree touching their respective new 52-week highs. Market analysts believe that this buying interest in the information technology sector is on the back of Happiest Minds Technologies IPO and feel that this buying may continue till the IPO gets close. “Normally, when a good company get into the primary market the same sector sees buying interest as per the premium demanded by IPO company,” Vishal Wagh, Head of Research, Bonanza Portfolio Ltd, told Financial Express Online.
HCL Tech and L&T Infotech were up in the range of 2.5-3.5 per cent, and touched new highs of Rs 737.40 and Rs 2,508.80, respectively. While Naukri, Coforge, Infosys, Wipro, Tech Mahindra and TCS shares were trading in the between 2-2.5 per cent. TCS shares scaled a new high of Rs 2,387.25 apiece and surpassed its previous high of Rs 2,357 on July 30, 2020. Bucking the trend, Infosys hit Rs 925, Coforge Rs 1,984 and Wipro Rs 286.95 as their new 52-week highs in intraday deals today. Mphasis and Mindtree shares also gained up to 1 per cent. Research and brokerage firm Nirmal Bang has upgraded its rating on IT sector to ‘neutral’ with a market cap-weighted upside of 10 per cent. “Our shift in stance (from a cautious one held for the last many years) is on the back of both, higher earnings and higher target PE multiples,” it said in a report.
The brokerage firm said that the earnings uplift is coming from the expectation of margin expansion over the next 2-4 years rather than any material pick-up in organic revenue growth. The changed view on margins has been driven by business model changes that the pandemic has induced, which it thinks are structurally positive. In its latest report, it highlighted that there was the reinstitution of guidance by Infosys, HCL Tech and Cognizant, indicating better demand visibility. This was a 180-degree turn after suspension of the guidance by the trio just a few months back.
TCS is Nirmal Bang’s sector benchmark with ‘accumulate’ rating as it has the strongest position in the industry. While it has upgraded its rating to buy on HCL Technologies and Wipro from ‘accumulate’ earlier. TCS and Infosys are structurally better companies but the brokerage company believes that current valuations factor in positives. “While our margins are a tad higher than consensus, we see the potential for further upgrades,” it said.