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Informist, Friday, May 9, 2025

MUMBAI – Information technology stocks are expected to remain range-bound in the near term until there is more clarity on the US tariff-led global tensions, the US Federal Reserve's decision on cutting interest rates, and escalating military tensions between India and Pakistan. Technical analysts expect the Nifty IT index to see a dip in the coming week after the recent gains. The IT index has rebounded 16% since the sharp fall seen on Apr. 7, when the index had hit a 52-week low. 

The Nifty IT index is seen facing resistance at 36000 levels in the near term, Rishubh Vasa, a research analyst covering the sector at Indsec Securities, said. "...if it tries to sustain at this level and eventually breaks out of 36000, then we should see another high for the index and that level can go up to 38000," Vasa added. 

A potential positive momentum in these stocks will hinge on how US President Donald Trump's global tariff talks take shape. Earlier on Thursday, the US, as part of its preliminary trade deal with the UK, reduced the tariff levied on British cars imported to the US to 10% from 27.5%, for imports of 100,000 cars a year. It is also considering lowering its existing 145% tariff on Chinese goods to a range between 50-54%, according to media reports. Investors will focus on the meeting between US Treasury Secretary Scott Bessent and trade representative Jamieson Greer and their Chinese counterparts in Switzerland on Saturday. "The worse is already behind us, we don't see much negative from the US-China talks," Sumit Pokharna, vice-president of research at Kotak Securities, said.

With the Federal Reserve's decision this week to keep rates unchanged for the third consecutive meeting, analysts will keep an eye on chances of a potential rate cut in the near term. The odds of the Federal Reserve keeping key interest rates unchanged at its meeting in June increased to nearly 80% from 70%, according to CME FedWatch Tool. US Federal Reserve Chairman Jerome Powell said he was in no hurry to cut interest rates, with the increased risk of higher inflation and higher unemployment triggered by tariffs. 

Additionally, any de-escalation of India-Pakistan tensions and the recovery of the automotive segment, particularly in Europe, could lead to positive movement in IT stocks, according to analysts. Kotak Institutional Equities expects the profitability of Indian IT companies to be impacted by the recent appreciation of the rupee against the dollar. Over the past three months, the rupee appreciated 3.5% against the dollar, creating significant headwinds for companies with a higher offshore revenue mix and greater exposure to the US, Kotak said in a report dated Wednesday. It expects the impact of this to be modest on a sequential basis for large IT companies that have lower exposure to the US, while mid-tier companies with a high US revenue concentration could see a higher impact.

The Nifty 50 and the Sensex fell 1.4% and 1.3%, respectively, this week. After rising for three consecutive weeks, the Nifty IT index remained flat over the week. Six of the 10 constituents of the sectoral index fell; L&T Technology Services and Mphasis fell the most, down 2% and 3%, respectively. Coforge Ltd. rose more than 4% over the week, outperforming its peers. Vipin Kumar, derivatives and technical analyst at Globe Capital Market, expects the index to find support at 34500 and face resistance at 36500 levels next week. 

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* Earnings Review: Coforge Jan-Mar PAT rises 21% QoQ, but misses Street's view
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* TCS to modernise Kuwait-based Jazeera Airways' digital infra
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* Latent View Jan-Mar consol PAT rises 27.6% QoQ to INR 534.76 million

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

US$1 = INR 85.37

Reported by Arya S. Biju

Edited by Avishek Dutta

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