It’s now two months since the June quarter earnings season commenced, and interestingly, the CNX IT index has outperformed the broad market despite weaker-than-expected results. The IT index rose 7.7% and the Nifty 2.4% during the period.

Mid-tier IT (information technology) stocks continued to outperform, with MindTree Ltd, Hexaware Technologies Ltd and KPIT Cummins Infosystems Ltd rising 12-14% in the past two months. These three stocks and NIIT Technologies Ltd rallied sharply in the past year on the back of stronger-than-expected financial results.

In the June quarter, their results were more or less in line with the Street expectations and, in fact, led to some cuts in revenue growth estimates. These stocks, however, have been rallying on hopes that the advantages for mid-tier companies, which aided industry leading growth in the past year, will continue at least in the near term.

According to a recent note by Edelweiss Securities Ltd, “Most mid-cap companies have positioned themselves as specialized players in an industry or a service line, which has enabled them to achieve robust growth. Hexaware and NIIT Technologies rode on their travel and transportation expertise, while MindTree and KPIT Cummins positioned themselves as specialized players in the manufacturing and automobile domains, respectively."

In the past two months, other mid-cap stocks such as CMC Ltd, Satyam Computer Services Ltd and Tech Mahindra Ltd, too, rose sharply—by as much as 27.5-30%. The mid-cap theme has not yet lost steam.