HCL Tech and Coforge gained 1.4% and 1.2%, respectively. Mphasis, Persistent Systems, Infosys and Tata Consultancy Services closed between 0.3% and 0.5% higher. Most of these shares traded 2-4% higher earlier in the day.
“Accenture’s guidance implies a turnaround in fortunes of the company and sector which led to a cheer at IT counters,” said Deepak Jasani, head of retail research at HDFC Securities. “The nominal shares gains at closing was on account of profit taking at higher levels.”
On Friday Nifty IT index surged up to 2.9% during the day but closed 0.4% higher while the benchmark Nifty fell 0.14%. Out of the 9 stocks in the Nifty IT index, 7 advanced while 2 declined on Friday.
Jasani said that Accenture reported good deal wins across verticals during the quarter, but a clearer picture will emerge after January-February next year when clients of companies decide budgets for the calendar year.
“Not only did Accenture upgrade its guidance, but also demonstrated strong revenue growth in managed services which is linked to Indian IT companies,” said Omkar Tansale, senior research analyst, Axis Securities. “IT companies are likely to offer better revenue growth visibility.”In the last three months, the Nifty IT Index jumped 17.1% against an up-move of 8.9% in the benchmark Nifty in the same period.Analysts say the positives from the US Federal Reserve’s interest rate cut has already been priced in and companies must deliver on earnings for the up-move in IT stocks sustain.
“After rallying from the lows of June, the next big up-move is likely to be when we hear higher deal wins and strong revenue growth guidance from IT companies,” said Jasani.
Analysts said that upside potential for IT companies is limited in the first-half of FY25, but the second-half is expected to be stronger in terms of growth which is likely to continue into FY26.
“The slower growth in BFSI vertical indicates that mid-cap ER&D IT companies are poised better than large-cap peers since they are less dependent on BFSI,” said Tanksale.
“The revenue growth is likely to be witnessed from the Q2 onwards.”
Tanksale said that the deal takeouts are robust at $3 billion for FY24, with Generative AI contributing about $ 1 billion in Q4 FY24. This implies resilient demand for new technologies and eliminates the recent risk and concerns on AI based spending, he said.
“Uncertainty on discretionary spends of IT companies due to Gen Al, ML and Al still exist in the sector and investors will be watchful of developments on this front,” said Jasani.