Indian IT stocks are on a roll, with the Nifty IT index rising over 1% on December 19, driven by softer US inflation and Accenture's better-than-expected Q1 results. This surge has reignited hopes for more rate cuts by the US Federal Reserve, making emerging market equities like India attractive for foreign portfolio investors.
US Inflation Slows Down
US consumer prices rose 2.7% year-on-year in November, slowing from a 3% increase in the 12 months through September. This moderation in the US Consumer Price Index has sparked hopes for lower interest rates in the US, which would increase the appeal of Indian stocks to foreign investors.
Accenture's Impressive Q1 Results
Accenture reported revenue of $18.74 billion, beating analysts' average estimate of $18.52 billion. The company's new bookings increased 12% to $20.9 billion, driven by artificial intelligence (AI) solutions. Accenture's management highlighted that the pace of overall and discretionary spending was at the same level as the previous year.
Impact on Indian IT Stocks
Indian IT companies such as Persistent Systems, Tata Consultancy Services (TCS), Tech Mahindra, Infosys, Wipro, and Mphasis are trading in the green with marginal gains. However, Coforge, LTI Mindtree, and HCL Tech shares are trading in the red, falling up to 1%.
Expert Insights
Jefferies has warned of downside risk to Indian IT stocks after Accenture guided for 1.5-4.5% organic growth in FY26. The international brokerage expects limited PE expansion for Indian IT firms and has reiterated its selective stance on the sector.
Remember, this is a perspective, not a prediction. It's essential to do your own research and consider multiple viewpoints before making any investment decisions. The Indian IT sector is closely tied to global market trends, so it's crucial to stay informed about the latest developments.
Key Takeaways
- Softer US inflation has boosted hopes for Fed rate cuts, making Indian stocks more attractive to foreign investors.
- Accenture's impressive Q1 results have driven investor sentiment, with revenue beating estimates and new bookings increasing 12%.
- Indian IT stocks have surged, with some companies trading in the green and others in the red.
- Expert insights warn of downside risk to Indian IT stocks, with limited PE expansion expected.