Indian information technology stocks saw significant buying interest on Thursday amid hopes that a potential slowdown in rate hikes by global central banks will bode well for the sector. Leading midcap IT names like Mastek, Mphasis and Mindtree outperformed their larger peers, gaining 5-7% during the session.
The recent dovish tone struck by the US Federal Reserve about the future path of interest rates helped lift market sentiment. The Fed Chairman signalled that the central bank could scale back the pace of rate increases going forward depending on incoming economic data. This has revived expectations that IT companies may see improved deal activity and client budgets in the coming quarters.
IT is one of the sectors that have borne the brunt of aggressive monetary tightening across major economies. With persistent worries of a recession, clients had adopted a cautious stance and deferred big-ticket spending. However, a slower rate hiking cycle should now aid a gradual recovery in demand. More so, as the sector offers relatively attractive valuations compared to its historical averages.
Among midcap names, Mastek continued to draw investor interest after updating about expansion in its order book and adding new logos. The company’s focus on niche Digital Engineering capabilities and steady client mining efforts have yielded results. While near-term volatility cannot be ruled out, the stock’s risk-reward looks favorable at current levels for long term investors.
Mphasis too hopped on the bandwagon following sectoral momentum. Its sizable exposure to the banking and financial services space makes it a prime candidate to benefit as declining rates support an uptick in spends. Moreover, the recent correction provided a better entry point for traders with a 1-2 month view.
Also making headlines was Mindtree which joined the coveted Nifty50 index recently. With its enhanced status and ability to target larger deals, the stock holds appeal from both fundamental and technical lenses. While valuations are not dirt cheap, bulls argue that strong growth visibility merits a premium.
Outside the IT majors, investors hunted for ancillary plays too. Nazara Technologies, a gaming tech pure-play, caught the eye after seeing accumulation in recent weeks. BHEL also found favour on the back of improved order inflows and its strategic push in products like hydrogen fuel cells.
In summary, improving sectoral sentiment coupled with recent healthy corporate earnings painted a favourable near-term picture for tech counters. Select midcap names with robust business models look set to ride potential outperformance in the days ahead.
