The weakness in benchmark indices is weighing on Nifty IT index too, though it is attempting to holds on to opening gains to trade nearly 0.75 percent higher on May 20, a day when selling pressure has pushed Nifty 50 further below the 25,000 mark.
Largecap IT names such as TCS, HCLTech, Infosys and Wipro are higher between 0.5-1.5 percent while midcap names like Coforge, Mpahsis and Persistent Systems are higher between 1.5-2.5 percent in early trade.
The gains in the IT index are offsetting weakness in Nifty Bank and the auto index. During Monday's weakness that saw Nifty 50 fail to hold on to the 25,000 level, Infosys and TCS were among the laggards on the index.
Supporting the sentiment in IT shares was Nomura's upgrade on Infosys, reaffirming the stock as its top 'Buy' with a target price of Rs 1720 per share. The brokerage cited takeaways from the CFO meet to state that the management's focus will remain on cashflow generation.
The rebound in US equities from the lows of the day to end in the green supported IT shares' growth prospects, hinting that investors were looking past the US credit rating downgrade by Moody’s. “...while the downgrade may lean against some of the recent ‘good news’ momentum, we do not expect it to have a major direct impact on financial markets,” Bloomberg News quoted Mark Haefele of UBS Global Wealth Management.
Progress in trade talks between US and China too has eased fears of a US recession, lending strength to Indian IT shares' business prospect from US shores. Goldman Sachs strategist David Kostin recently raised his F&P 500 forecast, factoring in better growth prospects for US and a less likely chance of a recession. Kostin said he expects the 'Magnificent Seven' technology shares to resume outperforming S&P 500 on the back earnings.
JPMorgan Chase in a presentation said that consumers and small businesses remain financially healthy, and a weak sentiment is not yet translating into changes in spending habits. However, CEO Jamie Dimon warned against complacency, citing risks from US inflation to geopolitics.
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