IT stocks power tired markets to new highs; Sensex, Nifty gain over 1%

BSE IT index soars over 5%; analysts warn caution ahead

Just as the equity market seemed to be running out of steam, a sudden shift in investor sentiment towards information technology (IT) stocks sent it soaring to new heights on Friday. 

The Sensex leaped 847 points, or 1.2 per cent, to close at 72,569, while the Nifty50 surged 247 points, or 1.1 per cent, to finish at 21,895. The two benchmark indices climbed fresh peaks on both intraday and closing bases.

The Sensex and the Nifty50 rose 0.8 per cent each this week. They were in the red last week. 

On Friday, the BSE IT index rose 5.1 per cent — its most significant single-day gain since April 30, 2020 — a day after market leaders Tata Consultancy Services and Infosys posted results that exceeded Street expectations, easing concerns about weak demand. Infosys, which gained 7.8 per cent, was the best-performing Sensex stock, contributing 366 points to the Sensex gains. TCS, which rose 3.9 per cent, was the second biggest contributor at 131 points.

For Infosys, the latest gains were the highest since February 9, 2023; for TCS, the uptick was the sharpest since January 19, 2022.

“The IT results were not as bad as the Street was expecting,” said UR Bhat, co-founder of Alphaniti Fintech. “The next few days will give a better picture of what investors think of these stocks in the medium term. There could have been shorting based on the negative expectations. And since they beat expectations, short covering could have propelled gains.”

However, G Chokkalingam, founder of Equinomics, noted that the revenue declined year-on-year in rupee terms for the IT majors. “Thanks to the depreciation in the rupee, at least IT companies are showing some growth. The sharp rise could be because of short covering. And the markets should correct next week.”

Foreign portfolio investors (FPI) were net sellers to the tune of Rs 32 crore; domestic institutions bought shares worth Rs 2,911 crore. The combined market capitalisation of BSE-listed companies rose by Rs 2.8 trillion to Rs 373 trillion.

The gains in IT stocks helped the domestic markets buck the trend with most Asian markets ending with losses. A drop in China’s exports, geopolitical tensions, and uncertainty over the US Federal Reserve’s rate cut trajectory weighed on sentiment.

On the geopolitical front, the US and UK launched airstrikes on Houthi targets in Yemen on Friday to halt their attacks in the Red Sea. The Brent crude rose 2.1 per cent during the day to trade at $81 per barrel. Doubts about whether the US Federal Reserve will cut rates in March bothered investors after higher-than-expected US inflation data this week.

The ongoing results season and the geopolitical situation in the Red Sea are likely to determine the market trajectory hereon, said analysts.

Ajit Mishra, SVP-technical research of Religare Broking, said: “We suggest focusing on other key sectors and using any pause or dip to accumulate quality names. The volatility would remain high due to earnings and mixed global cues, so plan the overnight trades accordingly.”