IT stocks firm up on Cognizant results

Last Updated: Thu, Nov 07, 2013 04:45 hrs

Buoyed by a per cent decline in the rupee and promising corporate earnings numbers posted by information technology (IT) firm Cognizant on Tuesday, stocks of technology companies firmed in a weak market on Wednesday.

The BSE IT Index was up 1.4 per cent on Wednesday and was among the best-performing indices. The rise in the index was led by the Tech Mahindra stock that rose 3.4 per cent. The Bangalore-based company is set to release its September quarter earnings numbers on Thursday.

On Wednesday, the rupee touched its lowest in two months and fell 1.2 per cent. It closed at 62.39 to the dollar.  

"Strong growth for Cognizant reinforces our positive view on Indian IT," said Kotak Institutional Equities' analysts led by Kawaljeet Saluja. "Cognizant management commentary of acceleration in client spending and modest positive bias to CY2014E budgets is encouraging and provides positive cues for FY2015E growth forecast," they said. Portfolio managers said the IT stocks may continue to outperform the market in the near term.

"The IT results announced have been very good. The outlook for the US and European operations we have received from the companies has been fairly positive.  So, we are confident the profitability will be good," said Sachin Shah, fund manager at Emkay Investment Managers.

IT stocks had been on the rise since June 11, with the decline in the rupee. Since then, IT stocks have risen 36 per cent. These were further buoyed by the good corporate earnings numbers posted by these companies. However, in 15-20 days, the stocks have declined three per cent, after gaining 11 per cent since the results season in October.

Going forward, some sections of the market believe that the rise in the IT sector will be interspersed by periods of consolidation due to growth-related concerns in the US and Europe. They said that unless greenshoots in the US and European economies are seen, these companies would struggle with their growth-rate.

"IT stocks have not moved up as much as they should have despite fabulous results because of the lower-than-expected growth rate.  It will be another month or two before we see any significant movement in these stocks. Till then these stocks will remain in this range, plus or minus 3-4 per cent," said a fund manager with a bank-sponsored fund house.

IT stocks gain

Company Closing price (in Rs) change (in Rs) % change
Tech Mahindra 1572.95 51.9 3.41
Tata Consultancy Services 2091.75 40.95 2.43
Infosys 3305.90 49.70 1.25
Wipro 481.5 2.4 0.5
Oracle Financial Services Software 3212.9 4.9 0.15
MphasiS 420.55 0.15 0.04
Hexaware Technologies 133.55 0 0
MindTree 1378.25 -8.45 -0.61
Financial Technologies India 171 -1.1 -0.64
HCL Technologies 1087 -13.15 -1.2
Source: BSE

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