Indian IT Index Extends Rally, Surges Nearly 4% in Two Days Amid Rupee Depreciation
IT Shares Extend Gains for Second Straight Session
The Nifty IT index rose nearly 4 percent over two days on Monday, driven by a stronger dollar and a weakening rupee, marking a rebound from a recent sharp correction in the sector.
The index settled 2.43 percent higher, following a 1.3 percent gain on Friday. This rally was fueled by expectations of improved earnings growth for information technology companies that derive a significant portion of their revenue in dollars. The index had declined 5.7 percent last week.
India's USD 315-billion IT sector earns around 57 percent of its revenue from the US market. The pullback in the sector comes after a recent sharp correction. Furthermore, sentiment was supported by the rupee falling to a fresh record low of 96.3325 against the US dollar, which benefits domestic IT companies as a large share of their revenue comes from US-based clients.
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Among frontline IT stocks, Tech Mahindra, Infosys, Wipro, HCL Technologies, and Tata Consultancy Services gained between 0.8 percent and 4 percent and were among the top gainers in the Nifty 50 index.
| Company | Gain |
|---|---|
| Tech Mahindra | 1.6% |
| Infosys | 1.1% |
| Wipro | 2.1% |
| HCL Technologies | 2.4% |
| Tata Consultancy Services | 2.5% |
In the mid-cap segment, Coforge, Persistent Systems, and Mphasis rose between 2.8 percent and 4.9 percent.
The Nifty IT index has gained about 4 percent in the last two sessions after witnessing a steep correction last week amid concerns that new artificial intelligence deployments by OpenAI could intensify competition for Indian IT companies and impact their revenues and market share.
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IT stocks have remained under pressure since early February due to concerns over artificial intelligence-led disruption and uncertainty surrounding recovery in discretionary spending. The Nifty IT index has fallen around 12,000 points from its peak of 40,301.4 touched on February 3, according to Informist.
Investor Takeaway
Investors should expect improved earnings growth for IT companies due to a stronger dollar and a weakening rupee.
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