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Informist, Friday, May 2, 2025

MUMBAI – Information technology stocks are expected to continue their positive momentum in the upcoming week, with receding tariff fears. In addition, management of most of the Indian and global IT companies, though cautious of the prevailing global uncertainty, are indicating no major negative surprises. Next week, investors will focus on the March quarter earnings announcement by mid-cap IT company Coforge. 

This week, the Nifty IT index rose nearly 1% over the week compared with 1.3% and 1.6% on-week rise in the benchmark Nifty 50 and Sensex, respectively. The IT index is now likely to go up for the third consecutive week, signalling improved sentiment after the March quarter earnings announcement by major IT companies. The index ended 0.3% higher at 35891.85 points on Friday. The index has rebounded around 10% since the sharp fall seen on Apr. 7, and 10.4% since Apr. 9, following US President Donald Trump's decision to pause reciprocal tariffs for 90 days. However, in April, the index closed in the red for the fourth consecutive month since the beginning of 2026. So far this year, the index has fallen over 17%.

Analysts attribute this rally in IT stocks to commentary by companies indicating the softer-than-expected impact of tariff-led global uncertainty on IT spending and a softening trade war between China and the US. Amit Chandra, an analyst covering the sector at HDFC Securities, attributed some part of this positive momentum in IT stocks to the recovery after a steep fall seen in the end of March and initial weeks of April.

"There is already stress in the system due to delays in deal closures, and lower deal conversions...but still, most of the large IT companies, barring a few, gave strong total contract value numbers in the March quarter compared to their global peers," Chandra said. Further, comments by large global technology companies on not expecting significant cuts in technology spending, including spending on artificial intelligence, generative AI and automation, also gave some comfort, Chandra said. There were also no major disappointments from the big seven global technology companies' results, he added.

 
However, he expects the IT index to continue to underperform in terms of returns in the first half of 2025-26 (Apr-Mar), with uncertainty persisting on growth in FY26. "... in the next two months if we get more clarity on growth this year (FY26) and next year (FY27), then this sector will see further rally," Chandra said. The index has been underperforming for the last three years, with returns mostly in mid-single digits compared with a pretty strong performance by the benchmark Nifty 50, he added.

Some analysts attribute the rally in IT stocks to guidance given by Indian IT majors--Infosys and HCL Technologies--for FY26. HCL Tech has guided for a 2–5% revenue growth in FY26, while Infosys gave guidance of revenue growth of 0-3%. "... I think market did not have that kind of visibility before the results came in," an analyst covering the sector at a domestic brokerage said, adding that the March quarter earnings of IT companies also shows some resilience for growth in FY26, which market were anticipating as a "wash-out year". He expects the positive momentum to continue for the rest of the year. "...we may not see a very big rally from here, but at least prices may not see a correction from this level," the analyst added. 

However, Vipin Kumar, derivatives and technical analyst at Globe Capital Market, said the possibility of some profit booking cannot be ruled out at this juncture, where the Nifty IT index has reached the resistance of 36500 levels. He sees immediate support for the index at around 35400 levels. 

Coforge will announce its March quarter earnings on Monday. Analysts expect the company to report a nearly 31% sequential rise in net profit and a nearly 6% on-quarter rise in net sales for the latest quarter. The company's March quarter earnings are expected to be driven by robust organic growth, reversal of furloughs, ramp-up of deals and synergy benefits of recent acquisitions.

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* Latent View Jan-Mar consol PAT rises 27.6% QoQ to INR 534.76 million
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* US client files case against Coforge over security breach
* Public shareholder TPG Rise sells 4% stake in Tata Tech via bulk deal Tue
* Coforge arm to sell Coforge Advantage Go to Sapiens UK for INR 4.91 bln
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* Sonata Software gets 5-yr deal worth $73 mln from US-based tech co
* Affle (India) to be known as Affle 3i effective Friday
* Earnings Review: Oracle Financial consol PAT up 19% QoQ, sales up marginally
* Analyst Concall: Tata Tech sees business momentum pick up Jul-Sept onwards
* Zensar Tech Jan-Mar consol PAT rises 10.4% QoQ to INR 1.76 billion
* Earnings Review: Tata Tech Jan-Mar consol PAT up 12% QoQ, beats Street view

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

End

Reported by Arya S. Biju

Edited by Akul Nishant Akhoury

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