The Indian stock market traded with strong gains on Friday, led by a rally in information technology (IT) stocks. The Nifty IT index gained as much as 2.3%, marking its second consecutive session of gains.
The gains in IT stocks also lifted sentiment across the broader Indian stock market, with the benchmark indices rallying more than 1% each.
The Sensex jumped 817.86 points, or 1.06%, to trade at 78,004.73, while the Nifty 50 was higher by 206.60 points, or 0.86%, at 24,279.35.
The IT stocks have been under severe selling pressure this year. The Nifty IT index has fallen by nearly 23% on a year-to-date (YTD) basis, sharply underperforming the benchmark Nifty 50 which has dropped 7% during the same period.
However, over the past month, the Nifty IT index has gained 1.4%, compared with a 0.8% rise in the Nifty 50.
On Friday, Infosys, Tech Mahindra and HCL Technologies led the sectoral rally, rising more than 3% each. They were followed by Tata Consultancy Services (TCS), Persistent Systems, Mphasis and LTIMindtree.
The rally in IT stocks came amid the ongoing June quarter earnings season, with major large-cap IT companies, including TCS, HCL Technologies, Wipro and Tech Mahindra, having already announced their Q1 results.
Why are IT stocks rallying today?
According to Sunny Agrawal, Head of Fundamental Research at SBI Securities, the reason for the rally in IT stocks today is predominantly a reaction to the Q1 results of IT companies over the last six to seven days. Most IT companies have reported either an in-line set of results or numbers that are slightly ahead of estimates.
At the same time, there were no negative surprises in terms of the numbers or the commentary, he noted.
“Most IT companies are upbeat about a very strong deal win environment and, at the same time, a very strong TCV (Total Contract Value). That shows strong revenue visibility. The only challenge is execution, which can shift depending on the global environment. Overall, numbers have been in line with expectations or slightly ahead. Looking at the outlook, there has been no significant deterioration in terms of the growth outlook,” said Agrawal.
He believes that mid-cap IT companies are likely to outpace Tier-1 IT companies in terms of growth for FY27.
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