Nifty IT Index Surges 2.42% on Jefferies Upgrade
By ThePip Desk
Indian IT stocks surge as Jefferies upgrades sector to ‘Neutral’. Nifty IT index gains 2.42%, with Infosys and Coforge leading the rally.
Indian software exporter shares experienced a significant rally on Monday, with gains reaching up to 4% across the board. All ten Nifty IT index stocks recorded increases, primarily driven by Jefferies upgrading its rating on the IT sector.
Jefferies moved its stance on the Indian IT services sector to ‘Neutral’ from its previous ‘Underperform’ position. This strategic shift involved closing their long-standing underweight position and adjusting their model portfolio.
Key Portfolio Adjustments and Market Movers
- Infosys was added to Jefferies’ model portfolio.
- Coforge Ltd’s weight within the portfolio was increased.
Infosys emerged as the top performer on the NSE IT index, climbing 3.77% to reach Rs 1,080.10. Several other prominent IT firms also posted notable gains.
- Oracle Financial Services Software Ltd gained 3.65%.
- Coforge saw a 2.32% increase.
- LTM Ltd rose by 1.98%.
- HCL Technologies, Tata Consultancy Services Ltd, Persistent Systems, Mphasis, Wipro, and Tech Mahindra all recorded gains exceeding 1% each.
The positive sentiment towards IT stocks was further bolstered by better-than-expected quarterly results from IT firms. Softer-than-anticipated US inflation data also reinforced expectations of a less aggressive policy approach from the Federal Reserve.
Jefferies’ Strategic Outlook and Valuations
Jefferies analysts noted that a greater emphasis on the cost-benefits of Artificial Intelligence could offer some respite to Indian equities. The “AI trade” had previously diverted foreign portfolio investor (FPI) funds from India and raised concerns about potential job losses within the large Indian IT industry.
- IT stocks are currently trading at 13-17 times earnings multiples, according to Jefferies.
- Earnings for IT firms are projected to grow in low to mid-single digits over FY26-28.
Jefferies considers valuations for the Indian IT sector attractive, identifying Infosys as its preferred pick. Despite modest revenue growth projections for FY26-FY28, a reversal in the AI trade could provide tactical upside.
By 2 PM on Monday, the Nifty IT index was trading at 29,465.20, marking an increase of 697.25 points or 2.42%. ICICI Securities projected that this short-covering trend in the IT index might continue, potentially pushing it towards the 30,000 level in upcoming trading sessions.