Taking cues from strong third-quarter Accenture earnings, the shares of information technology (IT) firms were in focus on Monday with the Nifty IT index gaining nearly 3 per cent on the National Stock Exchange (NSE) in intra-day trade. 

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Moreover, the buying in the IT sector could also be attributed to a sharp surge in the technology-heavy Nasdaq Composite index by 3 per cent on Friday. 

At around 11:54 AM, the Nifty IT index was the top gainer along with Nifty Metal, by nearly 2 per cent as compared to around 1 per cent gain in the Nifty50 index. Nifty IT index has tanked 24 per cent in the past three months as against a 7 per cent decline in the Nifty50 index till Friday. 

Tech Mahindra, HCL Technologies, Mphasis, Coforge, Larsen & Toubro Infotech, Mindtree, and Infosys, were up in the range of 2 per cent to 4 per cent on the NSE intraday. While L&T Technology Services, Wipro, and Tata Consultancy Services (TCS) were up between 1-2 per cent intraday. 

The demand outlook remains strong for Indian IT particularly aided by demand for transformational services and cloud adoption, says global brokerage firm Nomura. It had noted that while the FY23F demand outlook remains strong, expect it to slow down faster than consensus estimates for FY24F. 

Accenture’s Q3FY22 results underscore robust near-term demand as it delivered the US $16.16 billion revenue during the quarter, up over 27 per cent YoY in constant currency, while EBIT margin at 16.1 per cent was up 10 basis points YoY. EPS at US $2.79 was up 16 per cent YoY, Nomura said. 

Meanwhile, Accenture’s commentary suggests that the demand environment remains supportive, and the weakening macro environment has not yet started impacting growth in the sector. While supply-side challenges remain a point of concern, with elevated attrition and lower headcount addition, Accenture’s margin guidance implies a stable margin performance in FY23, Motilal Oswal Financial Services said in an IT sector update. 

“We maintain our positive stance on the sector as we expect sustained growth with stable margin. Infosys, HCL Technologies, and TCS remain our preferred picks within the Tier I IT space,” the brokerage firm said.