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Informist, Friday, Aug 16, 2024

MUMBAI – Shares of information technology firms are expected to continue gaining next week, provided cues from global markets remain positive, analysts said. Concerns of an economic slowdown in the US are fading after the recent retail spending and inflation data from the world's largest economy, they said. This has reaffirmed hopes that the US Federal Reserve will cut key interest rates in September.

The Fed cutting interest rates is seen as a major positive for the sector as that could result in an increase in spending by IT clients in the US, a significant market for Indian IT companies. The growth of the US economy directly affects discretionary spending by clients, the head of research at a domestic brokerage said.

Currently, there is a nearly 75% probability of a 25-basis-point rate-cut by the Fed in September, as per the CME FedWatch tool. The chance of a 50-bps rate cut has dropped to 25%.

The Fed aims to bring inflation down to its target of 2% before finalising rate cuts, Sumit Pokharna, vice-president of research at Kotak Securities, said. There is a strong possibility of a rate cut in September after the latest data, and this is expected to boost several sectors, particularly IT, he said.

However, analysts also cautioned against expensive stock valuations and slow sales growth, which are major concerns for the sector. Muted hiring by firms and slow discretionary spending by clients are stumbling blocks, a research associate at a domestic brokerage said.

Today, the Nifty IT index closed 2.9% higher at 40878.25 points, with all 10 constituents ending higher. This sectoral index was the top gainer among peers today as well as for the week. Shares of Mphasis and L&T Technology Services gained 6-7% this week.

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Following are the resistance and support levels for information technology stocks for next week as per calculations based on their prices on the National Stock Exchange:

End

Reported by Alina Geogy

Edited by Rajeev Pai

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