Indian IT stocks up for 4 straight days: Here's why
What's the story
Shares of Indian IT firms surged today, pushing the Nifty IT index into the green for the fourth consecutive session. The index gained 1.35% to 39,214.90 at 10.10am and has gained over 1,150 points (over 3%) during its four-session gaining streak so far. The surge is attributed to several factors including rising hopes for further rate cuts by the US Federal Reserve and a sharp rise in Infosys's American Depository Receipt (ADR).
Market reaction
Infosys's ADR hits record highs
Infosys's ADR surged sharply to new record highs on Friday, hitting a 52-week high on aggressive short-covering. The company clarified that it is not aware of any material event that led to this sudden spike. Traders told Moneycontrol that the sharp move was driven by a short squeeze after a major lender recalled a large chunk of stock lent out in the market.
Economic indicators
US inflation data fuels rate cut hopes
US consumer prices rose less than expected in the year ending November, with a 2.7% year-on-year increase. This is lower than the 3% rise in the 12 months through September. The moderation in the US Consumer Price Index has reignited hopes for more rate cuts by the Federal Reserve in the near future.
Policy outlook
Fed governor hints at potential rate cuts
Along with softer US inflation data, positive commentary from the Federal Reserve's management has also boosted hopes for more rate cuts. Federal Reserve Governor Christopher Waller said that the American central bank still has room to cut interest rates amid rising job market weakness. A rate cut in the US is likely to increase discretionary spending capacity, which will benefit IT companies heavily reliant on revenue from the US market.
Market trends
Accenture's strong results and value buying boost IT stocks
Accenture reported better-than-expected first-quarter results, driven by artificial intelligence (AI) solutions that help clients integrate the technology to enhance productivity. The company's revenue of $18.74 billion exceeded analysts' average estimate of $18.52 billion. The rise in IT stocks could also be due to value buying after months of downturn due to factors like Donald Trump's H1-B visa changes and tariff jitters.
Currency impact
Depreciating rupee and top IT gainers
The rupee has depreciated against the US dollar, trading at 89.55 against the American currency as of 12:44pm. This will benefit IT firms as most of their revenue is generated in US dollar. Wipro and Infosys were the top gainers on the index today, jumping over 2% each. Persistent Systems shares gained nearly 2%, while HCL Technologies, Coforge, and Tech Mahindra shares rose over 1% each.