The Nifty IT Index has hit a 52-week high at 32,949.55 from its October lows of 26,184, as the sector is expected to see sunnier days, after being marred by macro-economic headwinds in the last couple of quarters. 

Scrips of major IT companies have seen positive stock movement. The 10-stock index was led by L&T Technology Services (LTTS) with a 3 per cent rise, followed by Persistent Systems with a rise of 2.6 per cent, and Tech Mahindra with a rise of 1.5 per cent. 

Albeit market leader TCS scrip declined by 0.15 per cent and LTI Mindtree’ fell 0.72 per cent and Infosys gained marginally by 0.48 per cent. The Nifty IT index has also outperformed the Nifty50, as it rose 13.5 per cent in the last one year, vis-a-vis, Nifty50’s 11.7 per cent advance. 

Deal wins

Analysts see more upside momentum from the stocks as macroeconomic concerns for the sector have bottomed out.

BNP Paribas, in a report, notes that announcements of deal wins in the IT services sector were slightly higher than in the previous month. The three-month rolling average of deal signings fell a bit, but in recent weeks, mega deal wins have increased significantly. “This gives us comfort about a recovery in H2 of FY24 and a strong FY25, helped by the ramp-up of large cost optimisation deals and the bottoming out of macroeconomic concerns,” it said. 

Anand James, Chief Market Strategist at Geojit Financial Services, said, “Having broken above the consolidation band that had persisted for a painstakingly long period since May 2022, the Nifty IT index is poised to march higher. Our optimistic objective is 10 per cent higher at 36,500, with intermediate resistance seen at 34,336.” 

Away from peaks

Meanwhile, the IT index constituents, apart from HCL Tech and Persistent, are trading at least 10 to 40 per cent away from their respective life-time peaks, suggesting that there is good room for upsides. TCS and Infy, the index biggies, are trading 10.8 per cent and 23 per cent below their respective lifetime peaks, while Wipro is the farthest at 40 per cent distance.

In comparison, the IT index is 16 per cent away from its life-time peak, he further said. 

Omkar Tanksale, Research Analyst at Axis Securities, said, “The buoyancy in IT stocks is partly due to the overall bullishness in domestic equity markets. While the prospects of the tech sector were subdued, recovery has been faster as US and Europe, two of the largest geographies in terms of revenues, are out of the woods as inflation has stabilised.”