Information technology stocks are riding on the Accenture earnings beat wave on December 17 as all components on the Nifty IT index were in the green.
Nifty IT was the only sectoral index in the green, bucking the overall subdued trend. It was up 1.9 percent at open, while the Nifty 50 was down 0.3 percent.
IT consulting firm Accenture Plc raised its revenue forecast for second quarter on December 16, after reporting top-line growth of 27 percent, riding a digital transformation wave with more clients seeking its cloud and security services.
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Client spending, which rebounded last fiscal year to pre-pandemic levels due to a shift to hybrid working models, has stayed strong with Accenture reporting robust bookings of $16.8 billion in the reported quarter, up 30% from a year earlier.
The company now expects full-year revenue growth of 19-22% from the earlier estimate of 12-15%. It also expects earnings per share of $10.32-$10.60; and free cash flow of $7.7 billion-$8.2 billion.
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Analysts believe the strong results and outlook reinforce expectations of strong IT demand over the next few years.
“Demand is broad-based, across both digital leaders and laggards and driven by accelerated cloud migration and transformation spending, a multi-year journey for clients. Talent shortage and time to market constraints favor outsourcing. Core modernization is a large opportunity,” said brokerage Prabhudas Lilladher in a note today.
"Demand is expected to sustain, given the early stage of digital adoption, and multi-year cloud transformation journey, which will open up new opportunities," said Motilal Oswal.
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The brokerage has maintained a positive stance on the sector, with Infosys, HCL Tech and TCS as its preferred picks.
“While supply-side challenges remain a point of concern, Accenture’s margin guidance implies stable to improving margin performance in FY23,” the brokerage said.
The stocks in the Nifty IT index were up anywhere between 0.8 percent and 2.9 percent, with Wipro leading the pack.
Wipro may also be upbeat in trade today on the back of re-inclusion in the BSE Sensex index, with effect from December 20.
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It will replace Bajaj Auto and could potentially see inflows of up to $166 million, according to analysts.
The tech major was excluded from the Sensex in December 2018 after a long period of underperformance.
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