Nifty IT Rises Over 2% as Mphasis, Coforge, Infosys and TCS Rally Ahead of Q2 Earnings

IT stocks found buyers on Thursday even as the broader market struggled, with the Nifty IT index climbing more than 2% during the session. Mphasis, Coforge, Infosys and Tata Consultancy Services (TCS) were among the stocks leading the gains. 

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The rally marked a second straight session of gains for the IT index. A stronger US dollar and a weaker rupee provided support to the sector, while expectations around the upcoming September-quarter earnings also remained in focus. 

Mphasis gained as much as 5% during the session, while Coforge climbed 4%. Infosys rose 3%, while HCL Technologies, TCS and Tech Mahindra gained around 2% each. Wipro was up 1.5%. 

The gains stood out against a weak broader market, with the Nifty 50 falling more than 1% intraday. 

A Weak Rupee Backs Up IT Stocks 

One of the factors that backed up IT stocks included the movements in currency. 

The dollar index rose to 101.71, whereas the Indian rupee was trading around the 96 per dollar mark. 

In addition, a large part of the revenues of the Indian IT firms comes from dollars. Hence, currency movements play an important role in the IT sector. 

Another positive thing for investor sentiment includes the opinion of Morgan Stanley on certain IT stocks. As stated in the media sources by Livemint, Morgan Stanley has begun tracking Persistent Systems and Hexaware Technologies with an ‘overweight’ rating. 

Persistent Systems increased 1.5%, whereas Hexaware Technologies increased 2% during the day. However, both of these stocks were volatile and fell in negative territory. 

Mid-Level IT Companies Seen to Perform Better in Q2 

As earnings for September quarter start approaching, expectations for IT companies have started taking center stage. 

According to JM Financial, mid-level IT companies will post constant currency revenue growth of 2.7%-13% quarter on quarter. On a yearly basis, growth is likely to be in the 5.4%-47% range. 

In case of large IT companies, the growth is expected to be less exciting with constant currency revenue growth of -0.5%-2.6% quarter on quarter. 

As per JM Financial, mid-level IT companies will witness double digit organic revenue growth in FY27 with a strong first half performance. Large IT companies are still chasing mid single digit growth in the financial year. 

Emkay Expects Softer Quarter for Large IT Firms 

Emkay Global also expects large-cap IT companies to have a relatively soft September quarter, while some mid-cap companies could deliver stronger growth. 

The brokerage expects Tier-1 IT companies to report constant-currency revenue growth ranging between a decline of 1% and an increase of 3.1%. 

Tier-2 companies are expected to post growth ranging from 0.5% to 8%, with Coforge being an exception. The brokerage expects Coforge to record 12.6% growth, supported by the contribution from Encora. 

Cross-currency movements are expected to have only a limited impact during the quarter. Emkay expects reported dollar revenue growth for Tier-1 companies to face a 10-20 basis point impact, while the effect for Tier-2 firms could range between zero and 30 basis points. 

For Thursday’s session, however, IT stocks moved against the broader market trend, with gains across several large and mid-sized technology companies pushing the Nifty IT index more than 2% higher.