Buoyed by a robust quarterly show by software major Infosys, shares of information technology (IT) stocks emerged as top performers in on Wednesday’s rally. Led by the former, the IT index gained more than double the benchmark indices.
Compared to a 2.5 per cent rally in the benchmark indices, the IT index rose the most among all sectoral indices — by 5.21 per cent or, 273.02 points — on the Bombay Stock Exchange. It closed at 5,518.11 against the previous close of 5,245.09.
Infosys posted a net profit of Rs 1,822 crore for the quarter-ended September, up 11 per cent compared to Rs 1,641 crore in the corresponding quarter last year. Sequentially too, the company’s profitability grew in double digits. The earnings per share (EPS) for the quarter under review stood at Rs 31.73 compared to Rs 28.59 during the same quarter last year.
Infosys led the rally, with the scrip jumping 6.83 per cent or, Rs 171.3, to Rs 2,680.5. While HCL Technologies gained 4.29 per cent to close at Rs 420.25, Mphasis closed at Rs 339.6, up 3.98 per cent. Tata Consultancy Services (TCS) gained 3.66 per cent to close at Rs 1,079.35. Said Shanu Goel, research analyst at Bonanza Portfolio: “Infosys’ good Q2 results have boosted other IT stocks.”
The sharp surge in IT stocks comes at a time when analysts have been negative on the sector. Many had even given a sell recommendation on Infosys, by cutting the target to as low as Rs 2,200 against the earlier target of over Rs 2,700. In the early part of the quarter, top IT stocks had plunged around 20 per cent on the back of fears of a double-dip recession in the US and debt crisis in Europe.
“The street was pleasantly surprised by the revised earnings guidance for FY12, at Rs 143-145 a share against the earlier Rs 128-130,” said Sanjeev Zarbade, vice president (private client group research), Kotak Securities. On the BSE Sensex, which gained 421.92 points and inched closer to the 17,000-mark, Infosys and TCS were among the top six gainers. The former, which gained the most among the Sensex stocks too, contributed 101.68 points while TCS made a contribution of 27.25 points.
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According to a research note from Pinc Research, Infosys’ profitability guidance is robust as the EPS guidance, both in dollar and rupee terms, has been raised significantly. The research house has maintained a buy call on the stock, with a target of Rs 2,730.
According to data from the stock exchanges, during the quarter, foreign institutional investors reduced their stake in the company by 22 basis points to 36.66 per cent from 36.88 per cent in June. Meanwhile, domestic institution investors raised theirs by 87 basis points to 10.71 per cent.
TCS, the country’s largest IT major, is scheduled to announce its quarterly results on October 17, followed by HCL Technologies on October 18. Wipro will announce its performance numbers on October 31.