The Nifty IT index gained 1.2% on Tuesday to close at 27,624. Analysts said if the index sustains over Tuesday’s closing it will trigger a resumption of the uptrend after almost five months.
“The NSE IT index is well placed above its 20-, 50- and 100-day moving averages which re-confirm bullish sentiments ahead,” said Rajesh Palvia, head technical & derivatives, Axis Securities.
He expects the index to rise to 28,600 in the near-term, which is 3.5% above Tuesday’s closing.
Since early January, the IT index was consolidating within a range between 24,500 and 27,500 levels. With a strong momentum in the past couple of sessions pushing it out of this range, the index has decisively broken out of its multiple resistance zone of 27,300-27,500 levels on a closing basis on Tuesday representing an upward breakout, said technical analysts.
Except for Wipro shares, which rallied 32% in the last three months, other top five technology stocks have gained only 3-6% despite posting strong results in the March 2021 quarter.
“Nifty IT is attempting a five-monthlong consolidation range breakout. Noticeably follow-up buying above the multiple indecisive candlesticks near the overhead resistance of 27,220 augurs well for renewed buying interest,” said Sandeep Porwal, technical analyst, Ashika Stock Broking. “Sustained gains above the level of 26,900 shall result in a rally toward 28,700.”
Porwal is most bullish on Infosys, TCS, L&T Infotech & HCL Tech.
Stock such as Infosys, TCS, L&T Infotech and
have staged a reversal from the base formation near 20- and 50-day moving averages which usually is a signal of a resumption of an uptrend, said analysts. Infosys on Tuesday witnessed a breakout from the consolidation range at Rs 1,405 levels with huge volumes, pointing to bullishness.
Analysts said these stocks enjoy a higher margin of safety over their mid-cap peers, and added that on an average, mid-cap technology stocks are trading at 30% premium over large-cap’s stock valuations.
“The Indian IT sector will continue to trade at higher multiples well supported by improving visibility with strong deal wins, faster ramp-up, sustained margins, improving free cash flows, and improving demand environment across verticals,” said Aniket Pande, analyst at brokerage Prabhudas Lilladher. TCS and Infosys are its top picks.
