IT stocks shine as strong GDP data lifts sentiment; Mphasis leads on Morgan Stanley's upgrade

IT stocks jump on strong GDP data, hopes of rate cuts

IT stocks took the spotlight on September 1, as shares of major players including Mphasis, Coforge, Infosys, Tech Mahindra, Persistent Systems, TCS, and Wipro gained between 1 percent and 2 percent. The rally came after India’s GDP grew 7.8 percent in the June quarter, lifting overall market sentiment on Dalal Street.

All 10 constituents of the Nifty IT index traded in positive territory, with Mphasis leading the pack. The surge followed Morgan Stanley’s overweight rating on the stock, along with a revised target price of Rs 3,625 per share, up from Rs 3,500 earlier.

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Analysts believe micro factors are aligning in favor of Mphasis, and any macro support from interest rate cuts would provide additional tailwinds for growth. Morgan Stanley expects Mphasis to narrow its valuation gap with mid-cap peers as revenue growth picks up.

The IT pack has been on investors’ radar in recent days after US Federal Reserve Chairman Jerome Powell hinted at possible monetary easing. Powell suggested that the weak US job market could push the Fed to cut interest rates as early as its September 16–17 meeting.

Brokerages remain optimistic about the sector. Analysts at CLSA have maintained a bullish stance, citing strong US economic growth and signs of a revival in discretionary IT spending. They also highlighted that IT valuations remain attractive historically and relative to benchmarks such as the Nifty and Nasdaq, offering downside protection.

CLSA identified Infosys and Wipro as its top picks, rating them ‘Outperform’ and noting their high beta characteristics.

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