IT stocks rally up to 4% as an early indicator of Q1 earnings just gave green signals
Accenture had a few positive elements such as strong bookings growth and acceleration in growth rates.
Shares of Persistent Systems was the top gainer as it rallied over 4% to day's high of Rs 4,065 on BSE. Other IT stocks like Coforge, LTIMindtree, Infosys, TCS and LTTS were also trading around 2% higher during the day. As a result, the Nifty IT index was also trading around 2% higher.
Accenture's Q3 FY24 revenue growth of 1.4% in CC terms was slightly above the mid-point of its adjusted guidance band. The management commentary on demand environment was largely unchanged, with clients continuing to limit discretionary spending and the delay in decision-making persisting, particularly for smaller deals. However, the company maintained the mid-point of its guidance; this points to a broadly stable demand environment.
«Also, Q4 guidance of 2-6% growth in LC indicates a steady FY24 exit. The stability bodes well for Indian IT companies, even as a full-fledged recovery is now expected in CY25/FY26. We expect the start of the interest rate-cut cycle to act as a signalling trigger for clients, to gain confidence on the inflation trajectory and macro stability, which may drive demand recovery and an uptick in discretionary spending,» Emkay analyst Dipeshkumar Mehta said.
He expects IT stocks’ earnings downgrade to bottom out in H1FY25, if current expectations on interest rate cut materialise.
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Nuvama analysts noted
