Infosys share price hits new 52-week high, BSE IT index hits all-time high; what is fueling the rally in IT stocks?

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The BSE IT index climbed more than 1% to a new all-time high of 28,032.87 levels. Image: Reuters

IT stocks such as Infosys, Mindtree, Persistent Systems, among others, were trading higher on Thursday, ahead of quarterly earnings from IT companies which start pouring in from next week. Meanwhile, the BSE Computer Index climbed more than 1% to a new all-time high of 28,032.87 levels. Coforge (formerly NIIT Technologies Ltd), Larsen & Toubro Technology Services (LLTS), Mindtree and Persistent Systems hit new records on Thursday. Currently, IT stocks are doing well and outperforming the broader indices as well. Partial lockdowns, restrictions on the number of employees in the office, the increase in working from home and the recovery of the IT sector in the United States are fueling the current rally in IT stocks, an analyst said.

Infosys hit a new 52 week record and Mindtree set a new all-time high in today’s session. “Both stocks were trading in uncharted territory so the high side cannot be predicted but on the downside 1380-1400 is the demand area for Infosys while Mindtree has a demand area at 2100-2130” , Vishal Wagh, Head of Research Bonanza Portfolio Ltd, told The US Express News Online. Wagh advised investors to hold both stocks with a stop loss below the demand zone. While for the new entry, the strategy should be in depth, Wagh said.

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Infosys can announce a takeover

According to the BSE IT index, shares of Cyient and Sonata Software also hit new highs in 52 weeks. National research and brokerage firm Prabhudas Lilladher said cash and short-term investments jumped 25% year-on-year for Infosys in the first nine months of FY21. “Infosys is a likely candidate for announce a buyout given its strong FCF / PAT conversion (105% on 9MFY21), strong cash balance and lower payout ratio, ”the brokerage firm said. Infosys completed their last buyout on August 26, 2019. “We believe that Infosys can make a buyback of Rs 14,400 crore (20% of net worth), which would be greater than their past buyouts (13% of net worth). in January 2019 and 18). percent of net worth as of August 2017). The maximum allowable size of the buyout is 25% of equity, ”he added. Buyout Can provide strong support for current and expensive IT stock valuations.

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Robust Q4FY21 earnings expectations and a weaker Rupee led to a strong rally in IT stocks. “Technically Infosys looks strong and a close above 1453 could lead to 1530 in the next few sessions. 1400 will be strong support, ”AR Ramachandran, Co-Founder and Trainer of Tips2Trades, told The US Express News Online. For Mindtree, Ramachandran believes the stock appears to be overbought and that levels near 2275-2285 should be used by investors to record profits and only return to levels near 2070.

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Infosys may be a growth leader on FY21E-FY24E fiscal years through mega-deal gains, consistent investments in talent, new cloud-focused offerings and expanding ecosystem partnerships, said a analyst. “Mindtree is a major beneficiary of the recent surge in contracts won and improvement in the travel and hospitality industry,” said Suyog Kulkarni, senior research analyst at Reliance Securities.

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