Sensex, Nifty hit record highs as IT stocks extend gains- QHN

Benchmark indices hit record highs for a second straight trading session on Monday as information technology (IT) stocks extended their winning run following better-than-expected results from HCLTech and Wipro.
 

The Sensex crossed the 73,000 mark for the first time and ended the session at 73,328, with a gain of 759 points, or 1.05 per cent. The Nifty 50 index finished at 22,097, rising 203 points or 0.9 per cent. It took just 21 trading sessions for the Nifty to move from 21,000 to 22,000. This is the shortest the index has taken to cross a 1,000-point milestone since August 2021 when it moved from 16,000 to 17,000 in just 19 sessions.
 

IT heavyweights Infosys, HCLTech, and Wipro contributed a third of the gains on Monday. Large IT companies gained as strong results and management commentary alleviated growth concerns. The Nifty IT index rose 1.9 per cent, extending its two-day winning run to 7 per cent.
 

“IT was under-owned, and it was undervalued. With margins improving, they have seen a catch-up rally on the assumption that things are not as bad as we thought. Most of the IT results have beaten estimates. From now on, earnings and global markets will determine market trajectory. In the near term we will see a bit of consolidation and a bit of flat to down market,” said Jyotivardhan Jaipuria, founder of Valentis Advisors.
 

HCLTech’s revenue for the quarter grew 6.5 per cent year-on-year (Y-o-Y) to ~28,446 crore, and on a quarter-on-quarter basis, the growth was up 6.7 per cent, one of the highest revenue growths since Q3 of FY21. HCLTech’s performance beat Bloomberg’s estimates on both revenue and net profit. Similarly, Wipro’s net profit for the December quarter rose compared to the previous quarter, though it declined compared to profits it made in the same quarter a year ago. Wipro hit a 52-week high intra-day and ended the session with a gain of 6.3 per cent and was the best-performing Sensex stock, followed by HCL Technologies, which gained 2.9 per cent. HDFC Bank and Reliance Industries were the biggest contributors to Sensex gain, and they rose 1.9 per cent, and Reliance Industries rose 1.7 per cent.

“The IT sector has led the Nifty rally and has spiked significantly in the past two trading sessions because of decent results backed by cheaper valuations. However, the recent upswing warrants a certain degree of caution as, many times, such sharp rallies do not sustain. Thus, we believe that the near-term view will be cautious and suggest profit booking in areas of exuberance, especially in the small-cap space,” said Pranav Haridasan, managing director and chief executive officer at Axis Securities.

Andrew Holland, CEO of Avendus Capital Public Markets Alternate Strategies, said the IT results were better than expected, and the guidance was not negative.

“Now the feeling is that with interest rates coming down at some point next year, it will be good for tech stocks globally, and there will be some tailwinds from that,” said Holland.

Overseas investors bought shares worth ~1,086 crore, while their domestic counterparts were net sellers to the tune of ~820 crore. Overall market breadth was mixed on the BSE, with the number of gaining stocks outpacing losers by a thin margin.

European and Asian markets were weak amidst cautiousness ahead of a bunch of speeches by central bank officials in Davos. During the weekend, ECB Chief Economist Philip Lane’s statement that cutting rates too early would be self-defeating raised concerns for investors who are betting on rate hikes by major central banks in the US and Europe as early as March.

Analysts said both macro data and hawkish statements from central bank officials regularly undermined hopes of a dovish pivot. China’s Hang Seng declined after the People’s Bank of China left its medium-term lending rates unchanged, contrary to expectations of a 10-basis point cut.

Brent crude declined as rising supply from non-Opec countries and slowing demand outweighed concerns about tensions in the Red Sea.

First Published: Jan 15 2024 | 11:40 PM IST