TCS, Tech Mahindra to Coforge: Why experts are bullish on IT stocks — explained

Stocks to buy: .fter trading sideways to bearish, IT stocks are now witnessing some buying interest by Dalal Street bulls. In fact, mutual funds are also showing interest in major IT stocks. IT majors TCS, Infosys, Tech Mahindra, Wipro, etc. stocks have delivered positive return to its shareholders in last one month. IT major Infosys share price gained over 2.50 per cent in one month whereas Tech Mahindra share price ascended to the tune of 7.50 per cent in this period. Tata group companies Tata Elxsi shares surged around 6.50 per cent in last one month while Tata Consultancy Services or TCS shares gained more than 3 per cent in this time.

According to stock market experts, Indian IT and tech stocks are rising because of the strong US economic data and recent layoffs in major IT companies across world. They said that market is expecting improvement in margins of IT companies as their business would expand if the recent US economic indicators sustain their recent achievements. They said that Indian IT stocks follow Nasdaq index and the US’ tech heavy weight has rallied to the tune of 7.50 per cent in last one month.

Speaking on reason for recent rise in Indian IT stocks, Ravi Singhal, CEO at GCL Broking said, “Indian IT stocks follow US IT companies as they mainly get their business from the US and European IT companies. After recent layoff announced by the US IT and tech companies, Nasdaq has witnessed huge upside movement. However, good results by some tech companies too palyed its role in recent Nasdaq rally. This rally in IT stocks may further continue as strong US economic data is expected to expand business activities and business volumes of IT and companies.”

On how strong US economic numbers may fuel Indian IT stock rally on Dalal Street, Anuj Gupta, Vice President — Research at IIFL Securities said, “Indian IT companies are mainly service-oriented and they get majority of their business from the US and European region. As strong US economy is expected to fuel business activities, it may trickle down to business volume of the US-based IT companies as well. Since, Indian IT companies are an integral part of the US IT and tech companies business model, this benefit is expected to reflect in the balance sheet of Indian IT companies as well.”

On IT stocks that one can buy at current levels, Ravi Singhal of GCL Broking said that one can look at large-cap and mid-cap IT stocks like Tech Mahindra, TCS, Coforge, KPIT Technologies as these companies are expected to get early benefit of IT stock rally in India. However, Ravi Singhal maintained that small-cap IT stocks may also witness buying interest if the US economy manages to sustain strong economic numbers further.

Last week, US retail sales data came higher than market expectations. Later in the week gone by, US PPI data too came positive that further fueled buying in IT company stocks.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.

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