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The falling rupee is cheering at least one sector at the bourses — information technology. The S&P BSE IT index rallied to a fresh 52-week high of 7,659.77 on Tuesday, led by gains in Infosys, Tech Mahindra, Wipro and Hexaware Technologies. The index, which gained 35 per cent year-to-date, is however, still far from its all-time peak of 8,678, touched during the famous Y2K or dotcom boom.
In comparison, the BSE Sensex slipped one per cent year-to-date.
Infosys, the index heavyweight, surged to a 28-month high while three other stocks — Tech Mahindra, Wipro and MindTree — registered their 52-week highs on the BSE. TCS and HCL Technologies have registered their all-time highs in the first week of August and are ruling just a shade away from those levels.
According to analysts, IT counters have been on the rise mainly for two reasons. One, wWeakening rupee against dollar, and second, defensive bets by some institutions helped these stocks to outperform the overall market. The rupee has lost about 12 per cent to the dollar since the beginning of May.
“In a scenario of continued currency weakness, it would be prudent to stick to exporters and defensives in the near-term. That means HCL Tech, Wipro, TCS, Sun Pharma and Dr Reddy’s,” said Manishi Raychaudhuri, MD and Head of Research, BNP Paribas.
“Even though these stocks have outperformed massively, under the present circumstances they could continue to outperform,” he added.
Prabhudas Lilladher analysts Shashi Bhusan and Pratik Shah, who continue to prefer Infosys and Wipro in the segment, said: “Commentary from TCS, Infosys, HCL Tech, Wipro and Cognizant has been encouraging. The broad-based growth (i.e. across geographies and verticals), pick up in discretionary and reduced concern on the Immigration Bill are positives for Tier-1 Indian IT service companies.”
According to Credit Suisse, “While the IT stocks have done quite well in the past few months, consensus upgrades, the willingness of investors to pay a higher P/E multiple (given the pick up and lack of choice in India) and continuing INR weakness can provide more legs to this rally.”
Concrete signs of a pick up in discretionary spending can be the next trigger for stock upgrades , it added.
Infosys, which closed at Rs 3,084 with a gain of 2.6 per cent on Tuesday, is now up over 20 per cent since July, thanks to better-than-expected numbers for the April-June quarter and the return of Narayana Murthy. The company brought back Murthy as Executive Chairman in June this year.
> badrinarayanan.ks@thehindu.co.in
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