Fuelled by TCS’ Buyback Move, IT Bounce may be Here to Stay
Mumbai: The ascent in the Nifty IT index post the TCS decision to buy backsharescouldbethebeginningof a reversal in trend for technology stocks, at least in the near term, said fund managers and analysts. The Nifty IT index spiked 1.37% on Monday after gaining 2.1% last week. TCS’ share buyback announcement during trading hours drove up its shares by 4.1% to ₹ 2506.50 on Monday. The optimism rubbed off on peer Infosys too, which closed 1.2% higher on hopes the firm would emulate its bigger counterpart.
Analysts said share buyback is intended to reinstate investor confidence, which was hit due to concerns over tightening visa norms in the US and growth slowdown in the sector.
“Given that the noise surrounding H-1B norms has been largely priced into IT stocks and the surprise element is essentially over, the risk-reward ratio at this point may be attractive for investors,” said Dhiraj Sachdev, fund manager at HSBC Global Asset Management. Talk of Donald Trump’s protectionist policies notwithstanding, Nifty IT has risen 6.62% since November 9 when he won the US presidential election. The Nifty has gained 3.8% in the same period. An encouraging environment in the US banking industry with lower regulations and pick up in IT-related spending has led some analysts to turn bullish on IT stocks. Analysts said up to 45% of Indian IT revenue comes from financial services.
“We have been positive on the IT sector and since January we have tur ned overweight on it,” said Abhay Laijawala, head of India research at Deutsche Equities.
He said his argument is premised on a steepening yield curve in developed markets and net interest margins that are set to return.
“Automation is indeed a valid concern but it may be premature to say that it would be totally disruptive. Industry is adapting to automation and artificial intelligence as form of services,” said Sachdev of HSBC.
Analysts said share buyback is intended to reinstate investor confidence
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