IT stocks having their own Chandrayaan-3 moment. Did you miss the fineprint in Q1 results?

economictimes.indiatimes.com:

IT stocks suddenly rocketed into a higher orbit like Chandrayaan-3 on Friday in their biggest single-day jump since September 2020. All this despite the Q1 headline numbers of TCS, HCL Tech and Wipro had little or nothing to boast about. While TCS' June quarter numbers did not lead to upgrades, HCL Tech's figures were an all-round miss and Wipro's weak guidance drew bearish comments.

But stock prices have another story to tell. Led by 7% weekly jump in Infosys and 5.6% rise in TCS, Nifty IT index ended last week higher by 4.7%. While FIIs have been biggest sellers of Indian software exporters in recent months, domestic mutual funds are believed to have been playing bulls.

Kranthi Bathini of WealthMills Securities points out that no major impact of the banking crisis in US and Europe was seen in the BFSI segment of IT companies where the margins are on the higher side. “The order books were strong. The US economy has been strong despite all forecasts related to recession.

Moreover, there was no major negative news in the earnings. Most of the bearishness was already priced in and so the downside in IT stocks was limited anyways,” he said. Amid bear howling by foreign brokerages, his clients have been cherry-picking IT stocks on expectations that although the Q1 numbers may be muted the trend will reverse in the coming couple of quarters.

Despite the uncertain macro environment TCS reported a strong order book at US$10.2 billion (up 2% QoQ and 24.4% YoY) while Wipro's TCV came in at a decent $1.2bn (9% YoY growth). However, HCL Tech's new deal total contract value (TCV) of $1.6 billion in Q1 was down 23.8% QoQ and 22.1% YoY. “Firstly, the long-term growth outlook of the IT sector, backed by increasing global adoption of