Tech Mahindra shares hit new 52-week high, gains over 4%; here’s why
Tech Mahindra share price touched new 52-week high and rose over 4% on Friday’s trading session. The stock was Nifty 50 index’s top contributor. According to technical analysts, the stock has already given a multi-month breakout and today there is a strong price traction.
In the near term analysts expect information technology (IT) pack to finally come of slumber phase and show strong outperformance, where Tech Mahindra shares is likely to lead from the front.
The immediate support for the stock is ₹1,150, in the near term analysts expect the stock to trade in the range of ₹1330 – 1350. Tech Mahindra shares opened at an intraday low of ₹1180.55 and recorded a 52-week high at ₹1,226.15 apiece on BSE.
According to Vinit Bolinjkar, Head of Research, Ventura Securities, Tech Mahindra’s unique product mix and valuation discount with Tata Consultancy Services (TCS) and Infosys has rallied the stock.
Tech Mahindra is a globally recognised company that specialises in telecommunication systems and software. Despite the challenges faced by the entire IT sector as a result of the weakened global economy, Tech Mahindra stands resilient due to its substantial presence in the media and telecom industry, which accounts for 40% of its revenue. This advantageous position shields Tech Mahindra from the headwinds experienced by the IT sector, thanks to the increasing investments being made by both developed and developing countries in 5G telecommunication infrastructure.
Further, the company has taken proactive measures to establish itself as a leader in 5G technology, assembling a dedicated team to spearhead its efforts. As a testament to its success, Tech Mahindra’s revenue from 5G-related initiatives surpassed USD 1.0 billion in FY23.
“Moreover, Tech Mahindra currently trades at a favourable FY25 P/E of 17.5X, which represents a 23% discount compared to TCS (with a FY25 P/E ratio of 22.6X) and a 7% discount compared to Infosys (with a FY25 P/E ratio of 18.8X). While industry giants like TCS and Infosys may face challenges in generating new deals due to the weakened US and European markets, Tech Mahindra is well-positioned to experience an upswing in deal flow due to its exposure to the thriving telecom sector. This potential improvement in deal flow could help bridge the valuation gap between Tech Mahindra and its competitors,” added Bolinjkar.
After quite a few of IT companies already released their Q1FY24 results this week, Tech Mahindra will announce its Q1 earnings on Wednesday, July 26.
The IT pack as a whole was trading in green throughout Friday’s trading session. The top contributor, Mphasis, contributed 7% of the gains to the Nifty IT’s gain of over 4%.
L&T Technology Services, TCS, Coforge, LTI Mindtree, HCL Technologies, Infosys, Persistent Systems, and Wipro all saw gains of 1% to 4%.
According to Vinod Nair, Head of Research at Geojit Financial Services, IT stocks were witnessing contra buying supported by stable margins,new business possibilities, and a rise in pricing power brought on by the USD’s moderation as recent US inflation is rapidly approaching the Fed’s target levels.
TCS, Wipro to Infosys: Why IT shares are skyrocketing today — explained
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Updated: 14 Jul 2023, 02:29 PM IST
