IT stocks gain on strong results by Cognizant

Moneycontrol Bureau

Several software services providers like Tata Consultancy Services, HCL Tech, Wipro, Infosys and Mindtree gained 1-2 percent in morning on Thursday as better-than-expected first quarter results by US-listed Cognizant Technology Solutions cheered the street.

Cognizant's Jan-March quarter net income rose 17 percent year-on-year to USD 284.2 million, while revenue gained 18 percent to USD 2.02 billion.

It has also maintained its full year revenue growth guidance of 17 percent, which is way ahead of NASSCOM's FY2014 guidance of 12-14 percent. Infosys has guided for a growth of 6-10 percent in the current financial year.

"Cognizant delivered financial services-led 3.7 percent sequential revenue  growth. Guidance for Q2 was solid at 5.4 percent sequentially," Kotak Institutional Equities said.

Also Read: Cognizant sees outperformance in 2013, pricing to be stable

IT spends, particularly in the banking and financial services sector, had been hit over the last one year, as clients cut spending and slowed down decision making 0amid the overall economic uncertainty and the European debt crisis.

So the brokerage was "positively surprised" by the growth in the financial services vertical.

Kotak has maintained it expects a modest recovery in IT spending in the financial services vertical.

Although the street is hopeful that the recovery in this vertical will be broad based and boost revenues at Indian IT firms too going ahead, the brokerage said it is still debatable if it is a broader recovery in the market.

At 9:45 hrs, HCL Tech was up 2.7 percent at Rs 771.50, TCS shares rose 1 percent at Rs 1,494.20, Wipro too gained 1 percent to Rs 354.60 and Infosys was up 0.3 percent at Rs 2,358 on NSE.