IT’s time to celebrate when chips are down; Nifty IT soars 11.7% to log biggest weekly rally since 2008

Indian IT stocks staged their biggest weekly rally in 18 years, dating back to the days preceding the collapse of Lehman Brothers, as a secular and precipitous fall in AI-related semiconductor stocks elsewhere in Asia boosted battered legacy outsourcing powerhouses with proven revenue streams and decent operating margins.

Better-than-expected September quarter earnings mirroring Accenture’s stellar performance and robust future guidance, steady deal flows, and inexpensive valuations after a spell of prolonged correction drew investors back to the sector that is typically over-owned by overseas funds.

The Nifty IT index surged 11.7% during the week, its biggest gain for the period since April 2008, even as semiconductor-heavy Asian markets tumbled amid concerns over the profitability of massive AI investments.

“The rally is being driven by better-than-expected quarterly results, particularly from HCLTech, improving deal prospects and value buying after a prolonged correction,” said Ravi Singh, chief research officer at Master Capital Services.

India’s IT services sector is also showing signs of stabilisation after nearly two years of cost-cutting and subdued growth. Growth averaged 2-2.5% quarter-on-quarter, while rupee-reported revenue rose 11-15% year-on-year. TCS onboarded 24,000 freshers in the first half of the year, while HCLTech added 6,450 employees during the quarter.

The technology index jumped 3.9% to close at 31,924 on Friday, its highest level since February 22.
To be sure, even after the latest surge, the index has retreated 16% year-to-date. The Nifty gained 2.8% during the week

Software Majors Add More Hands inQ2 on Deal Wins, Growth Optimism

Five out of the top six Indian technology companies sequentially doubled job additions in the September quarter to 10,300, overcoming concerns that artificial intelligence (AI) would shrink employment in the country’s most globally tracked industry through automation and an inevitable revenue squeeze.

In the $315-billion industry, with a combined 7.52% weighting on the Nifty as of end-September, Wipro was the only company to shed jobs, reducing its headcount by 6,700.

Data showed the top six had added a net 5,500 to their rolls in the April-June quarter.

Employee data of Infosys, the country’s second-largest software exporter, isn’t included in these calculations as the company is due to announce earnings on October 23 and hasn’t shared its latest manpower data.

Excluding Wipro’s reductions, Tata Consultancy Services (TCS), HCLTech, Tech Mahindra and LTM (formerly LTIMindtree) added a massive 17,100 employees in the second quarter.