3 reasons why tech stocks are rallying today? Nifty IT Index jumps 3%; Infosys, TCS, Wipro surge
The technology sector is up and about in trade today. The Nifty IT Index is up 3% in trade today. The top gainers include Infosys, TCS, Mphasis, HCL Tech and Wipro. The share price of most of these stocks have rallied over 3% each in intra-day trading. All the constituents of Nifty IT Index are trading in the green.
Even the top gainers on the Sensex and the Nifty include tech bellwethers like Infosys, TCS, HCL Tech, Wipro and Tech Mahindra. The big question is what’s the big trigger for the rally?
According to Dr VK Vijayakumar, Chief Investment Strategist, Geojit Investments, “Fed chief Powell’s remark at Jackson Hole that ‘there is a downside risk to unemployment and shifting risk balance may warrant policy adjustment’ clearly indicates a rate cut in September.”
3 reasons why tech stocks are rallying today
The tech companies across Asian markets are upbeat and, specially for the Indian markets the key triggers include-
US markets cheer after Powell’s rate cut hint
The US markets closed Friday’s session at record highs after US Federal Reserve chief, Jerome Powell, in his Jackson Hole speech, paved the way for a potential rate cut at the Fed’s September meeting. Though he stressed the importance of jobs and inflation data due before then, the expectation is that tech stocks may recover with support from lower US yields and corporate earnings reports after Jackson Hole.
Motilal Oswal cautiously optimistic on IT Services
The management teams of IT services companies maintain a “cautiously optimistic outlook,” as per Motilal Oswal. Their latest report stated that “while recognising that ongoing macroeconomic headwinds continue to pressure overall demand,” many companies like Infosys maintained a cautiously optimistic stance while HCL Tech remained the most constructive, guiding for 3–5% growth this year.
Kotak Institutional Equities bets on IT services even in high Gen AI adoption scenario
A latest report by Kotak Institutional Equities indicates hat they believe that IT Services will continue to be relevant “even in a future with high gen AI adoption.” According to them, the new opportunities from generative AI adoption “will offset revenue deflation in existing volumes over time. However, we expect a lag in the pickup of new opportunities and for savings in software development to be deployed into these new opportunities, leading to a period of net headwinds.”
The report stated that “gen AI can impact revenue growth for Indian IT by 2-3% for 2-3 years on a net basis. Our current revenue growth assumptions build in some portion of this impact already.”