Tech stocks lift market to new highs

MUMBAI: The Nifty and Sensex broke out of their two-week ranges on Friday as lagging tech stocks posted their biggest gain in nearly three-and-a-half years on expectations of further interest rate cuts in developed countries. It reached an all-time high. Software spending by companies there. The outlook for the stock market remains bullish, with tech stocks expected to join banks in the rally after a year of weakness.

The Nifty rose to an all-time high of 21,928.25, while the Sensex soared to an all-time high of 72,720.96 before settling slightly lower. Nifty and Sensex rose 1.14% and 1.18% to end at 21,894.55 yen and 72,568.45 yen, respectively.

The biggest contributors to Nifty's 247-point rise were Infosys, which added 88.65 points or almost 36% of the index change, TCS (31.25 points), ICICI Bank (18.15 points), L&T (15.84 points), and Reliance Industries (15.34 points). points). . Infosys and TCS alone accounted for almost half of Nifty's gains on Friday.

With gains in Infosys, TCS, TechM and LTIMindtree, the Nifty IT sector stock rose 5.14%, its highest level since July 15, 2020, when it rose 5.24%.

According to options writers, Nifty is likely to trade in the range of 21,800-22,300/22500 next week with an upward bias.

Rajesh Palviya, senior vice president (technical and derivatives) at Axis Securities, said, “Largecaps will outperform and RIL-led IT, oil & gas and financials will push Nifty higher in the near term.” Stated.

Nifty's rise from its March 20, 2023 low of 16,828.35 has been driven by strong fund flows from mutual funds and FPIs. INR1.84 trillion INR1.71 trillion in the previous calendar year.

The outlook for equity markets remains strong, but returns are expected to slow in 2024 as markets factor in the possibility of policy continuation with subdued inflation and an expected victory for the Bharatiya Janata Party in the next national elections. .

“Returns in Indian equities are likely to be slower than in the past (20% rise in Nifty in 2023),” Abax Asset Manager said, predicting returns in the low to mid-teens. ing.

“Volatility and wild swings are part of the stock market and will continue to be part of it. Investing based on story and momentum may seem exciting, but it will likely end in disaster,” Abbax said. stated in the report.

Downside risks stem from sustained inflation, which could make it more difficult for the RBI to cut interest rates and keep companies' cost of funds high, impacting their profits.

IIP growth slowed to 2.4% in November, the lowest in eight months, while retail inflation in December rose to 5.69%, the first in four months, according to government data released Friday night. reached a high level.

“Investors are hopeful that the Fed is likely to cut interest rates later this year, which will improve the scenario for IT companies,” said Prashanth Tapse, senior vice president (research) at Mehta Equities. speaks.

JM Financial Institutional Securities analyst Abhishek Kumar maintains a hold recommendation on both TCS and Infosys, with price targets set. INR3,840 and INR1,480 each.

TCS' outlook includes -1.1% dollar revenue growth quarter-on-quarter (qoq), with EBIT (earnings before interest and taxes) margin of 24bps driven by lower subcontractor expenses, higher utilization rates, and currency advantages. It is expected to expand. . Similarly, for Infosys, dollar revenue is expected to increase by -1.1% QoQ with Ebit margin decreasing by 30 bps QoQ due to the impact of his two-month wage increase in November .