IT stocks lifted the Indian equity benchmarks Sensex and Nifty50 higher in Thursday's trading session with the IT index up 1.79 percent led by buying across Suvidhaa Infoserve Ltd, Zenzar Technologies, BCG, and Infosys shares.
At 12 noon, the IT index was trading 1.14 percent higher at 35,456.60, up almost 400 points from its previous close on the Bombay Stock Exchange (BSE). The index was trading 0.93 percent higher at 34,567.89 on the National Stock Exchange (NSE) led by gains in Infosys, LTI, and Wipro.
Zensar Technologies Ltd stock, the new entrant on Dalal Street, jumped 4 percent during the session with brokerage Edelweiss initiating coverage on it with a ‘buy’ rating and a target price of Rs 705. According to the brokerage, Zensar is now taking all the turnaround metrics that are new leadership, high digital revenue, and focus on competencies. Zensar’s new CEO has also laid out five strategic areas the company is going to focus on.
Meanwhile, Infosys shares rallied more than 2 percent after the IT major announced an extension of its digital innovation partnership with the Australian Open (AO) until 2026 end. As part of the collaboration, Infosys and Tennis Australia, who have worked together for the past three years, will continue to harness big data and analytics, artificial intelligence, virtual reality and cloud technologies to elevate the AO experience.
The shares of another tech behemoth Tata Consultancy Services (TCS) were also in the green, rising a little over 1 percent during the day. The uptrend comes on a day the Indian tech giant announced its tie up with Plaza Premium Group (PPG), a global airport hospitality services provider based in Hong Kong, to develop an end-to-end digital platform that will improve customer experience and operational excellence at 70 airport locations that serve 20 million passengers annually.
“Indian tech stocks have rallied incessantly over the last 18 months and some of them now look expensive on 1-year forward consensus earnings,” Edelweiss said in its report. The brokerage reiterated that multiples won’t catch up with the earnings surprise— much like the IT upcycle of FY09–16. Investors meanwhile continue to underestimate the robustness of the demand upcycle and are fixated on seasonality (furloughs) and seemingly stubborn supply-side risks, it said.
However, it asserted that ground-level checks show supply-side concerns are no more than blips that are already waning and concluded that the tech upcycle remains not just intact but steadfast.
Edelweiss’ statement is backed by findings of its survey, which suggests: i) supply-side constraint is real, but the attrition situation is easing off vis-à-vis last quarter. ii) Attrition peak is behind, and it expects attrition rates to edge down to pre-COVID levels over the next two–three quarters. iii) Demand continues to be unbelievably strong, and this quarter even furloughs are likely to remain low. Price hikes would thus start showing up at EBIT in Q3FY22 itself.
Vinit Sambre, Head-Equities, DSP Investment Managers, is also positive on IT stocks. “There could be some rerating expected in few of the IT companies where they are into restructuring mode or there are some management and strategic changes, but on the whole, positive view on IT continues,” he told CNBC-TV18.
Tech stocks have given almost 45 percent returns to their investors so far in 2021 (year-to-date) as against 21 percent returns from the benchmark index Sensex.
First Published: Dec 16, 2021 2:12 PM IST
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