IT Stocks Hit Fresh Highs: Here's What Is Fuelling Rally In This Pack

Amid strong equity momentum, after metals, the other sector i.e. buzzing in today's trade (April 8) is the IT pack. This is ahead of the Q4 earnings season to be announced from next week. At the time of writing this copy, Nifty IT traded with gains of 1.31 percent. Intra-day the IT index both on the Nifty and Sensex has hit a fresh high of 27413 and 28032, respectively.

IT Stocks Hit Fresh Highs: Here's What Is Fuelling Rally In This Pack

IT stocks that hit fresh new highs

Some of the stocks on the surge in the index have hit a fresh high including Coforge, L&T Technology, Mindtree and Persistent Systems. Infosys, Cyient and Sonata Software even hit a fresh 52-week high

What is fuelling a rally in IT stocks?

Strong positive outlook for IT sector:

As per an analyst another wave of Covid 19, restrictions to again work from home, limited employees at office and recovery of the sector are some of the positives fuelling a rally in the sector.

Also, there has been resounded a positive outlook for the sector. There has been made a strong forecast for the sector by firms like Gartner and ISG for the year 2021.

In today's session ( April 8,2021), the major contribution comes from stocks like TCS, Infosys, InfoEdge, Tech Mahindra and Mphasis.

Depreciation in rupee:

This is another reason fuelling rise in IT stocks. Any depreciation in domestic currency against the dollar and currently beyond 74 per US dollar supports rally in IT stocks as IT stocks fall under the defensive category.

Infosys may also announce a buyback offer:

"Infosys is a probable candidate to announce buyback given its strong FCF/PAT conversion (105 per cent on 9MFY21), strong cash balance and lower payout ratio," the brokerage firm Prabhudas Lilladher said. The last time it announced its buyback was in August 2019. And there is an estimation of the IT major announcing a buyback worth Rs. 14400 crore i.e. 20% of the company's net worth. Buyback may lend support to the existing expensive valuations of IT stocks.

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