IT shares gain on US stimulus hope; TCS, Infosys near record highs

The IT index outperformed the market in the April-June (Q1FY21) quarter

Shares of information technology (IT) were trading up to 3 per cent higher at the bourses on Tuesday on report that the US government is working on a stimulus of $2.4 trillion.

Tata Consultancy Services (TCS) gained 3 per cent to Rs 2,505 on the National Stock Exchange (NSE). The IT major's stock was trading close to its all-time high level of Rs 2,555, touched on September 22, 2020. Infosys was also up nearly 2 per cent to Rs 1,028, near its record high of Rs 1,037, hit on September 23.

Among other IT stocks, Mindtree, Wipro, Ramco Systems, Persistent Systems, Oracle Financial Services Software and eClerx Services were up between 2 per cent 3 per cent.

At 10:05 am, Nifty IT index, the top gainer among sectoral indices, was up 1.7 per cent, as compared to 0.11 per cent rise in the Nifty 50 index. The IT index hit an intra-day high of 20,146, close to its record high level of 20,332 on the NSE.

Analsysts at ICICI Securities believe if the stimulus package is passed, it will lead to faster recovery of the US economy. Indian IT companies will benefit from the same as they generate significant part of revenue from US geography. However, in an election year, the quantum of stimulus, timeline and the proposal to go through seems uncertain, the brokerage firm said in a note.

The IT index has outperformed the market as in April-June (Q1FY21) quarter, the sector saw healthy deal wins, deal pipeline and margin resilience. This gives confidence of robust revenue growth in coming quarters.

In addition, one of the structural changes witnessed in Q1FY21 was higher focus on digital technologies like cloud, core modernisation and cyber security. This could be a key driver of revenue growth over the longer term for the entire IT space. Analysts believe sustained deal wins by companies will be key thing to watch in coming quarters.