Mumbai: Shares of information technology companies gained for the fourth consecutive session as analysts expect that the fall in rupee may help improve profit margins.
“The pull back in information technologies companies was due to the recent rupee depreciation which may help improve margins of these companies. The sector was under-performing from the last few quarters and the shares corrected sharply, hence investors used the opportunity to buy these stocks,” said independent market analyst Ambareesh Baliga.
“However, the sector remained under pressure because of slowdown in orders, Trump victory which may pose a risk to growth and profitability of the Indian IT companies which depend on the US for as much as 55-60% if their revenue,” Baliga warned.
The Indian currency sank to a record low against the dollar before staging a marginal recovery on Thursday as global funds sold Indian and other emerging market assets on rising expectations of a US interest rate increase next month. The rupee hit record low of 68.86 on Thursday and fell 2.4% so far in November.
Some analysts expect the local currency to hit a level between 70 and 72 per dollar in the near term in the belief that the Reserve Bank of India (RBI) would want to preserve its foreign exchange reserves.
“Most IT stocks have been in a consolidation phase in recent times and the possibility of further rupee depreciation owing to a Fed rate hike will only be positive for IT companies,” said Sahil Nandkumar, an analyst with Choice Broking.
Infosys closed at 4.8%, its steepest gain in seven months; Tata Consultancy Services Ltd rose 5.2%, the maximum gain in nearly three years; HCL Technologies Ltd and Wipro gained 4.5% and 3%, respectively, their maximum gains in nearly two years; Tech Mahindra Ltd gained 6.1%, the most in six months.
BSE IT jumped 4.7%, its biggest gain in over three years. The index gained for the fourth consecutive session and rose 7.07% in this period. So far this year, it fell 10.7%.
Other mid-cap IT companies also gained. HCL Infosystems Ltd surged 20%, 3I Infotech Ltd rose 11.2%, RS Software India Ltd rose 8.8%, Tata Elxsi Ltd rose 7.4%, 8K Miles Software Services Ltd rose 7.4%, Hexaware Technologies Ltd rose 7.3%.