The Indian information technology index is celebrating more than one thing on Tuesday, as it rallied 3.4% within one hour of the opening bell. The rise follows a steep global chip stock and tech stock selloffs.
All the major IT stocks traded higher, with Tata Consultancy Services Ltd. rising as much as 5.6% to Rs 2,244.5, HCLTech up 5.4% to Rs 1,289, Wipro rising 3.13% to Rs 166.86, and Infosys Ltd. up as much as 2.51% to Rs 1,045.65.
What's Driving The Rally?
The rally comes even as global markets undergo a massive semiconductor selloff, which dragged South Korean index Kospi down more than 6% to its lowest level since July 3.
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Lucky for us, the Indian IT sector is largely insulated from chip selloff and pricing. Traders have gone back to questioning the sustainability of the AI capex cycle done by hyperscalers and chipmakers alike, and along with that the high valuations of chip majors.
"The two moves are one trade. Korean memory makers are the AI capex winners; Indian IT services are the AI deflation losers. When the KOSPI falls from above 7,000 a week ago to below 6,000 today, tripping a sell-side curb as foreign investors dump Samsung and SK Hynix on Chinese memory competition and doubts that AI spending pays off, capital unwinds the pair: sell the beneficiaries, cover the victims. Indian IT is rising because the thing that was hurting it is being questioned, not because its business has changed," said Harshal Dasani, Business Head, INVAsset PMS.
Beyond the AI jitters lie strong quarterly results by Indian software services majors like TCS and HCLTech for the second quarter of FY27
Q2 Scorecard: TCS, HCLTech Pass Street Expectations
TCS Q2 Results - Cons, QoQ
- Net profit up 4% at Rs 13,884 crore vs Rs 13,349 crore QoQ
- Revenue up 1.3% at Rs 73,188 crore vs Rs 72,275 crore QoQ
- EBIT up 1.4% at Rs 17,553 crore vs Rs 17,317 crore QoQ
- EBIT margin at 24% vs 24.38% QoQ
TCS Q2 Results vs Estimates
- Net profit at Rs 13,884 crore vs estimate of Rs 13,788 crore
- Revenue at Rs 73,188 crore vs estimate of Rs 73,026 crore
- EBIT at Rs 17,553 crore vs estimate of Rs 17,805 crore
- EBIT margin at 24% vs estimate of 24.38%
HCLTech Q2 Results Key Highlights (Consolidated QoQ)
- Revenue rises 11% to Rs 35,620 crore versus Rs 34,579 crore (Estimate: Rs 35,547 crore)
- Net profit rises 11% to Rs 5,132 crore versus Rs 4,624 crore (Estimate: Rs 4,875 crore)
- EBIT rises 10.9% to Rs 6,465 crore versus Rs 5,831 crore (Estimate: Rs 6,243 crore)
- EBIT Margin expanded to 18.1% versus 16.7% (Estimate: 17.56%).
In constant currency terms, revenue rose 2.3% quarter-on-quarter and services revenue increased by 3.4%.
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