IT stocks thrive on large deals and stable US economy amid earnings challenges

Following the release of Q1FY24 results, most IT stocks experienced a decline, but have since then not only recuperated all their losses but are also trading at levels higher than those before the weakness set in. Year to date, IT stocks have defied expectations of a slowdown, delivering impressive returns.

Notable names like HCL Tech and LTIM Tech have yielded nearly 20 percent returns, illustrating the sector's resilience. The exceptional performance of IT stocks, despite lackluster results in the fourth quarter of financial year 2023 and the first quarter of FY24, can be attributed to securing large deal wins and the overall stability of the US economy.

These substantial deals have bolstered their already robust order books. TCS today unveiled a significant agreement with JLR, valued at an impressive $1 billion over a span of five years. HCL Tech, last month, inked a remarkable deal exceeding $2 billion with Verizon, while Infosys clinched a mega-deal with the Liberty Group, valued at Euro 1.5 billion for an initial five-year term, with an option to extend it to eight years, estimated to be worth 2.3 billion euros.