Summary:
IT stocks rebounded on June 22 after witnessing heavy selling pressure in the previous session. The Nifty IT index gained as investors accumulated stocks at lower levels and short-covering supported the recovery. Infosys, Tech Mahindra and Coforge were among the key gainers, although the bounce appears to be a technical rebound rather than a shift in the sector's long-term outlook.
The IT sector saw buying interest on Monday, June 22, after a sharp correction in the previous session.
Nifty IT climbed by 201 points or 0.74% to close at 27,628. During the day, it touched a high of 27,856, up 1.57% from Friday's closing level of 27,426.
Despite gaining on Monday, the index remains almost unchanged from the levels observed on April 25, 2023.
What Triggered the Sell-Off?
Selling pressure in IT stocks had been building over the past few weeks after the launch of Anthropic's latest AI model. Investors feared that artificial intelligence could reduce demand for some traditional outsourcing, coding and consulting services offered by Indian IT companies.
Accenture FY27 Growth Guidance at 3%-4%
The selling pressure intensified on Friday after Accenture lowered its revenue growth guidance for FY27. The global technology and consulting company now expects revenue growth of 3% to 4%, compared with its earlier forecast of 3% to 5%. The softer outlook acted as a trigger for fresh selling across IT stocks.
Accenture's weaker outlook made investors worry that companies may spend less on technology projects in the coming months. The news led to selling in shares of information technology companies worldwide.
Stocks such as Infosys Ltd, Tata Consultancy Services Ltd and Tech Mahindra Ltd saw profit booking as investors reacted to the softer outlook.
Why Did IT Stocks Rise Today?
Monday's move appeared to be a pullback after the sharp correction rather than a fresh trigger-led rally. Traders used the decline to pick up stocks at lower levels, while short-covering further supported prices during the session.
US Dollar Holds Above 94.5
IT stocks also found support from the strength in the US dollar. The dollar index was hovering around 94.59 during the session. A strong dollar usually helps Indian IT companies as a large portion of their revenue comes from overseas clients.
Coforge Gains Over 2.5%
Among the gainers, Coforge Ltd rose nearly 2.8% and touched an intraday high of ₹1,505. The stock closed at ₹1,485.50 reflecting a gain of 1.52%. Oracle Financial Services Software Ltd gained around 2.1% to ₹9,849.50. Infosys Ltd advanced about 2% to ₹1,072.90, while it closed at ₹1,065, gaining 1.29%. Tech Mahindra Ltd climbed around 2.4% to ₹1,444 and closed as a top gainer in the IT sector. The stock closed at ₹1,440 which translates to a gain of 2.16% from the previous close.
While Monday's gains indicate improving sentiment, the recovery appears to be more of a technical rebound after last week's steep decline rather than a change in the sector's overall outlook.
Sources:
https://in.tradingview.com/chart/UN1211G4/
https://www.nseindia.com/market-data/live-equity-market?symbol=NIFTY%20IT
