Tech Giants Propel Market: IT Stocks Index Surges by 5% with Infosys and TCS Leading the Charge

IT stocks have emerged as the top performers on the BSE following the release of quarterly results by Infosys (NS:INFY) and TCS. The BSE IT Index witnessed a significant surge of nearly 5% on Friday, making it the standout gainer among all sectors.

In this notable uptrend, Infosys recorded an impressive 7.6% increase, Sonata Software (NS:SOFT) rose by 7%, Datamatics saw a 6% uptick, Coforge (NS:COFO) experienced a 5% rise, Tech Mahindra (NS:TEML) and TCS each gained 4%, while Wipro (NS:WIPR) and Mphasis (NS:MBFL) both registered a 4% increase.

According to a report from Elara Securities, Infosys' Q3 results reveal ongoing challenges such as revenue leakage, weak discretionary demand, and a disconnect between deal wins and revenue growth. The report highlights concerns about the lack of positive indicators in management commentary on revenue growth outlook, and the limited scope to leverage traditional margin levers, with utilization standing at 82.7%. With two consecutive quarters of revenue decline in H2FY24, Infosys faces a challenging start to FY25, as indicated by the revised guidance projecting a 0.7% QoQ revenue dip in Q4E at the midpoint.

Elara Securities also noted that Tata Consultancy Services (NS:TCS) exceeded expectations with a revenue increase of 1% QoQ in Q3FY24, surpassing both the median consensus estimate of 0.2% growth and the forecasted contraction of 1%.

V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services, commented that the IT stocks are likely to witness positive movement today, given the inline results from Infosys and the better-than-expected performance of TCS. Despite the lack of positive signals in the management commentary, the market is expected to react positively to the absence of adverse news. However, the upside for TCS and Infosys may be constrained as the sector awaits further clarity on its prospects in FY25.

(With Agency Inputs)