IT shares gain for 3rd day: Tech Mahindra, TCS rise up to 3% on hopes of Fed rate cut, end to US shutdown

TCS, Infosys among other IT shares extend run on positive cues. 

The information technology (IT) shares extended their gains for the third straight session on Wednesday, supported by optimism over a possible India-US trade deal and expectations of an end to the prolonged US government shutdown.

Optimism over rate cut by Federal Reserve next month also added to the bullishness towards IT stocks.

Weakness in US private payrolls data for October released on Tuesday prompted traders to add to wagers that the Fed will deliver a 25 basis point rate cut next month, driving down near-tenor US Treasury yields.

Rise in IT companies, which earn a significant share of their revenue from the US, comes after the US Congress looked set to end the federal shutdown and firming bets of further rate easing in December 10.

The Nifty IT index rose over 2 percent during the day’s trade and has advanced nearly 5 percent over the past three sessions. All 10 constituents of the index were trading in the green, gaining between 1-4 percent.

Nuvama said Indian IT companies outperformed expectations in the September quarter, with profit margins led by forex gains, operational efficiencies and robust deal-wins.

Demand environment remains stable, with companies prioritizing strategic investments in next-gen technologies, particularly artificial intelligence, to drive revenue growth, said Nuvama.

The brokerage added that IT stocks are trading at attractive valuations after the sharp 15% correction in the last 12 months.

Nuvama maintains "buy" on Coforge, Persistent, Mphasis, LTIMindtree, Hexaware, TCS and Infosys and remains negative on Tech Mahindra and Birlasoft with a "reduce" rating.

Tech Mahindra led the rally, rising 3.7 percent to an intraday high of Rs 1,460.20 on the NSE. LTIMindtree and Mphasis followed with gains of 2.95 percent and 2.68 percent, respectively.

Tata Consultancy Services (TCS), Persistent Systems, HCL Technologies and Infosys were up between 1-3 percent.

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IT companies derive a significant portion of their revenue from the United States, making them sensitive to developments in US trade and economic policy.

US President Donald Trump has said the United States was close to finalising a deal with India aimed at strengthening economic and security ties, boosting energy exports and promoting investments in key sectors, Reuters reported.

"We’re getting a fair deal, just a fair trade deal," Trump told reporters at the Oval Office during the swearing-in of his envoy to India, Sergio Gor. "We’re making a deal with India, much different deal than we had in the past. We’re getting close," he added.

"Optimism over a potential India-US trade agreement has boosted market sentiment, which is further supported by expectations of an end to the US government shutdown and a likely rate cut in December,” Gaurav Garg, research analyst at Lemonn Markets Desk told Reuters.

Investor sentiment also improved as hopes grew for a resolution to the US government shutdown. The House of Representatives is expected to vote Wednesday on a compromise bill to restore funding to government agencies and end the 42-day shutdown, which began on October 1.

The Senate passed the deal on Monday night, and House Speaker Mike Johnson has said he expects it to clear his chamber as well. President Trump is expected to sign it into law.

"We’re opening up our country. Should have never been closed," Trump said at a Veterans Day event in Arlington, Virginia.