- Nifty IT index rose 1.82% on Thursday, marking its third consecutive gain
- The index is still down 14.78% over the past year, underperforming Nifty 50
- HCLTech's strong Q2 results sparked the recent IT sector rally and optimism
The Nifty IT index ended Thursday at 30,719.80, up 548.80 points, or 1.82%, marking its third straight session of gains. By our calculation, that is about 8.4% above Monday's close of 28,349.60.
The greenshoot comes after a hard year. NSE data show Nifty IT is still down 14.78% over the past 12 months, worse than the 10.67% fall in the Nifty 50. The Nifty Midcap 100 is up 0.74% and the Nifty Smallcap 100 is up 7.17% over the same period.
The chart below shows how the year unfolded. Until mid-January, Nifty IT was the strongest of the four indices. A sharp fall began in February, and by late June the index had lost about 30% from its peak, by our reading of the chart. It has since regained roughly 10% from that low.
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What Revived The Hopes
The rally began on Tuesday, after HCLTech's September-quarter results. The Nifty IT index rose 5.2% that day and another 1.14% on Wednesday. HCLTech shares jumped more than 8% on Tuesday.
The numbers were compelling enough to draw buyers. HCLTech's EBIT margin rose to 18.1%, up 130 basis points from the previous quarter and above estimates. Net new bookings were $3.3 billion, up 27% from a year earlier. The company raised its FY27 revenue growth guidance to 2.5%-4% from 1%-4%.
WealthMills Securities' director for equity strategy, Kranthi Bathini told NDTV Profit that HCLTech has revived hopes on IT. He described a market in a “buy-on-dips, sell-on-rally” mood, and said IT stocks have underperformed, have strong balance sheets and have come through earlier crises, from Y2K and the dot-com bust to 2008, GST and Covid. “Right now we tend to see some optimism and bottom-fishing,” he said.
Geojit Investments' V K Vijayakumar told PTI that the optimism around HCLTech should keep the IT index strong.
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Wipro Shows How Selective It Is
Wipro's results on Thursday bore out another of Bathini's points, that the action in IT is “very stock specific”.
The IT major's net profit for the September quarter was Rs 3,200 crore, below the Rs 3,306 crore analysts expected. It was 4.5% lower than the Rs 3,352 crore in the June quarter, and 1.4% below a year earlier.
Revenue was Rs 24,753 crore, marginally above the Rs 24,710 crore estimate, and up 1.1% from the June quarter. EBIT was Rs 3,986 crore against an estimate of Rs 4,018 crore. The EBIT margin was 16.1%, against 16.26% expected, though better than 15.6% in the previous quarter.
Growth was the weaker part, as Wipro's IT services revenue was flat from the previous quarter in constant currency and up only 0.6% from a year earlier. In rupee terms, total revenue rose 9.1% from a year ago, but constant-currency figures strip out the effect of exchange rates.
Wipro's US-listed ADRs fell 4.4% after the results, whereas its Indian shares are expected to remain under pressure when trading resumes on Friday.
Brokerages Are Split
The brokerages that reviewed HCLTech's results after Tuesday's rally show a similar divide.
Axis Securities' Kuber Chauhan and Abhishek Bhalotia rated the stock a buy with a target of Rs 1,360, citing its deal pipeline and AI adoption. Nomura raised its target to Rs 1,330 from Rs 1,310 and lifted its FY27 EBIT margin estimate to 18%. It also noted that revenue growth was below consensus, and that a mega deal won in July will ramp up meaningfully only in the April-June quarter of 2027.
Others were more cautious. JPMorgan is underweight, arguing that slower organic growth at the guidance midpoint calls the premium multiples into question. Citi rates the stock a sell and says it trades at a 20%-25% premium to TCS and Infosys. HDFC Securities said the guidance implies no acceleration in the second half of FY27.
Bottom-Fishing Or A Rally?
So far, the evidence leans towards bottom-fishing. The buying has centred on companies with strong results, such as HCLTech, whereas Wipro's flat constant-currency growth shows the demand picture has not turned for everyone. Brokerages that are positive on HCLTech point to deals and AI, and those that are not point to growth that is not yet accelerating, and to valuations.
A rally would need the gains to hold, and growth to show up in company guidance. Until then, Nifty IT has regained only about a quarter of the ground it lost since January, as the chart above shows. For now, the market is paying for results, with one stock at a time.
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