Nifty IT index hits 52-week high, LTTS surges 3% — here are analysts' top stock picks

"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 percent higher at 36500, with intermediate resistance seen at 34336," said Anand James, Chief Market Strategist at Geojit Financial Services.

"Meanwhile, the IT index constituents, apart from HCL Tech and Persistent, are trading at least 10 to 40 percent away from their respective lifetime peaks, suggesting that there is good room for upsides. TCS and Infosys, the index biggies are trading 10.8 percent and 23 percent below their respective lifetime peaks, while Wipro is the farthest at 40 percent distance. In comparison, the IT index is 16 percent away from its lifetime peak," James said.

The combined forex revenue of Indian IT companies including TCS, Infosys, Wipro and HCL Tech, in 2022-23 was higher than that of listed oil and gas, and listed non-oil and gas companies in other industries, according to a report by Business Standard.

IT companies' forex revenue was at Rs 5.14 lakh crore in fiscal 2023, a growth of 20.7 percent year-on-year. It is compared with the total forex earnings of other manufacturing companies (ex-IT and oil & gas) at Rs 5.08 lakh crore during FY23, down 5 percent on-year, the report added.

"More than half of the revenues of IT firms are derived from North America, and sector-wise, they are reliant on the BFSI sector for nearly 40 percent. The major players are reporting a solid build-up in the order pipeline and working to maintain margins," said Sreeram Ramdas, Vice President at Green Portfolio PMS.

"However, we are foreseeing difficulties for the next one year. Orders in the pipeline are having difficulty converting, and the year-on-year revenue guidance is in the early single digits. When the BFSI and retail players in the Western regions undergo timid performance during the anticipated recession, this will put additional stress on the order pipeline," Ramdas added.

Investors saw some correction in the IT Index as compared to the benchmark Nifty 50 as the Q1FY24 performance of IT stocks was not encouraging. The management of most of the IT companies remained cautious for the short term as global macro challenges, concerns in the US and also clients delaying signing deals impacted sentiments, said Nirvi Ashar - Fundamental Analyst at Religare Broking.

"Further, from the past 1-2 months, IT index has rebounded and is supporting benchmarks to inch higher and touch new highs because we are seeing buying interest of investors in IT on the back of comfortable valuation and continuous demand as well as companies announcing signing of large and mega deals," Ashar said.

In the near future, continuous demand for cloud, digitalisation, Artificial Intelligence, cyber security, etc. will drive growth, as per the analyst. "Thus, we expect the momentum for IT index to continue."

Amongst the stocks, TCS, HCL Tech and Infosys remained the analysts' top picks.

According to market expert Ravi Singh, "CNXIT is witnessing some profit booking after touching its all time high, taking cues from the overall strength in benchmark indices and global markets. It may touch the levels of 30000 in this momentum."