Mid-cap IT Stocks

Analysts anticipate growth momentum to return in FY25 for IT sector, aided by a lower base coupled with easing sectoral headwinds.

A combined 2.42 million equity shares, representing 1.73 per cent of the total equity of the company, had changed hands on the NSE and BSE till 11:21 AM.

Fed rate cuts, Accenture promotion delay sour mood

Nifty IT up 1.77 per cent intraday after US Fed signals rate cut in September. HSBC believes mid-tier IT is not so strong.

On the bourses, Mphasis has rallied 26.7 per cent in the last three months, driven by expectations of interest rate cuts in the US and early signs of recovery in the US-BFS sector.

Given the bottoming out of revenue growth rate, analysts expect the earnings per share (EPS) downgrade cycle to come to an end for the sector

While index requires to scale major hurdles, the aggressive rally towards those has triggered positive upside in IT stocks.

Thus far in the calendar year 2023 (CY23), the stock price of Cyient has zoomed 74 per cent, as against 2.5 per cent rise in the S&P BSE Sensex.

Stellar long-term track record, growing digitalisation augur well for IT sector funds

Despite the ongoing selloff and the global macroeconomic stress, analysts say that the IT sector still remains a preferred bet from a long-term perspective

Select mid-cap IT stocks may surge up to 10 per cent on short-term rebound

While the overall growth outlook is positive, there are headwinds for margins and valuations are at premium to large-cap IT firms

Mindtree is the top performer among IT firms for the month with returns of 27.2 per cent, followed by Nelco and Tech Mahindra

Their m-cap is up 5% this month, against 11% rise in large-cap IT stocks

Unlike the top four or five IT players, when it comes to the mid-cap IT services players, every company has a different strategy and focus segments

Sharp premium over larger peers and ability to maintain margins can cap gains

The Nifty IT index has managed to conquer the resistance of 27,500 which suggests a further upside towards 28,200 and 28,500 levels

These five stocks are likely to gain ground in the days ahead, provided the overall market sentiment stays strong.

They also remain optimistic on the road ahead for the IT sector given the sharp fall in rupee's value against the US dollar.

Going by the analysts' view, the IT sector, as a whole, faces four major challenges.