IT shares gain; Infosys touches new high

Shares of information technology (IT) companies were trading higher following gains in U.S. equities as strong homebuilder data added to signs of an improvement in the world’s biggest economy.

Infosys, Tata Consultancy Services (TCS), Mindtree, Wipro, Tech Mahindra and HCL Technologies were up 1%-3% each on the National Stock Exchange (NSE).

At 10:56 AM, the CNX IT index was the largest gainer among sectoral indices, up 1.8% or 216 points at 12,217 compared to a 0.30% rise in the CNX Nifty.

In the past one month, the IT index has outperformed the market by gaining 8.6% due to weakening of the rupee against dollar. The benchmark index was down 1.2% during the same period.

On Monday, the rupee ended at over two-year lows of 65.32 against the US dollar, falling by 2.9% from 63.47 since July 17, 2015.

Among individual stocks, Infosys has rallied by 3% at Rs 1,176 to emerge as the biggest gainer on the NSE. The stock hit a new high of Rs 1,178 in intra-day trades, and has rallied nearly 26% from its recent low of Rs 938 on July 10, 2015 against a 1% rise in the benchmark index.

Analysts at Prabhudas Lilladher have recommended a ‘buy’ on Infosys, with a target price of Rs 1,340.

“We expect Infosys to deliver 9.5% year-on-year revenue growth in FY16 which will be accelerates to 15% in FY17. In a growth starved world staring at deflationary risk, we expect funds to chase the companies with accelerated revenue outlook. Hence, we expect Infosys to see a re-rating through the course of FY16”, analysts said in report dated August 4, 2015.

TCS is up 2.2% at Rs 2,745 after hitting a high of Rs 2,749 in intra-day trades on the NSE. The stock is 3% away from its lifetime high of Rs 2,834 touched in October last year.

Systematix Institutional Research has initiated a coverage on TCS with a target price of Rs 3,000. “We remain positive on TCS due to its sustained confident stance on business outlook aided by commentary on its clients’ budgets (expects trends to continue in CY16 as well), strong deal intake across verticals/geos, deal win across traditional and digital/SMAC (social, mobile, analytics and cloud) areas and its view on the discretionary demand,” the brokerage analyst said in a report dated July 21, 2015.

Infosys Technologies Limited