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Informist, Friday, Aug 30, 2024

MUMBAI - Shares of information technology companies are likely to extend gains next week, as the sentiment for the sector has been growing stronger by the day. This comes as hope for a revival in discretionary demand grows, spurred by expectations of rate cuts from the US Federal Reserve. This has led to another wave of buying in information technology stocks, according to analysts.  

This week, the Nifty IT index ended 4.1% higher at 42787.80, outperforming both the Nifty 50 and Sensex, which ended 1.7% and 1.6% higher, respectively. All constituents of the information technology index ended higher on a week-on-week basis, with shares of LTIMindtree gaining the most, followed by those of Persistent Systems. This is the third consecutive week the information technology index has closed higher.

Analysts expect information technology stocks to gain further, after their underperformance over the past few months, which has kept valuations in the sector relatively reasonable compared to the inflated levels seen in much of the market. Alongside that, the positive management commentary by most information technology companies post the Apr-Jun earnings, hints that the worst for the sector is behind.

A broad-based rally was seen in the IT space this week, with participation from both large and mid-cap stocks. This momentum is expected to continue in the near term, making any dips a buying opportunity, said Rajesh Bhosale, technical analyst at Angel One. 

The Nifty IT index is currently exhibiting a bullish trend on the charts, driven by a sharp rally in the near term. This rally has brought the index close to its significant resistance level, which is expected to be around 43100. As the index approaches this resistance level, there is an increased likelihood of consolidation, suggesting that the upward momentum may pause temporarily, said an analyst from a domestic brokerage firm. 

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Following are the resistance and support levels for the sector's key stocks for next week, as per calculations based on their prices on the National Stock Exchange:

End

Reported by Darshan Nakhwa 
Edited by Deepshikha Bhardwaj

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