After Accenture posted strong earnings for its September-November quarter, IT shares in India saw a surge on Friday with the Nifty IT index rising 2% to hit a record high of 23,408. Ireland-based IT major Accenture beat analyst expectations with a 4% growth in revenue. It also revised its revenue growth guidance for the financial year from 2-5% earlier, to 4-6%.
Riding on the optimism from the global IT giant, shares of IT companies in India too, rose on Friday. As of 1 30pm, Wipro’s shares were up 1.85% at Rs 363.50, while Infosys was up 2.70% trading at Rs 1,190.50. Tata Consultancy Services (TCS) saw its stock rise nearly 2% to Rs 2,892.90, while HCL Technologies was up 2.31% at Rs 899.70 and Mindtree up 0.41% at Rs 1,458.00. Overall, all IT stocks were up between 1-3% on the National Stock Exchange.
At the time of writing, the Nifty IT Index was trading 2.07% up at 23,367.05.
Why are investors optimistic?
Last quarter, while announcing its Q4 results, Accenture had said that it expects the impact of COVID-19 to last longer than anticipated. However, a healthy growth this quarter, along with 25% increase in new deal bookings augurs well for the prospects of the IT industry globally.
Analysts have said that a strong growth in Accenture’s outsourcing revenue too, is a good sign for Indian IT vendors.
However, analysts from Jefferies India are betting big on cloud, security, and digital revenues. Accenture reportedly said while announcing its earnings that it expects cloud services to grow in double digits. This, Jefferies told Mint, shows that there is a massive demand out there for cloud, security and digital transformations, which would be growth drivers for the IT industry.
This comes as most of the world moves to remote working models, that require companies to undergo a digital transformation faster than they would have otherwise. IT firms too, are seeing demand for cloud and digital services, something TCS too mentioned while announcing its financial results.
“Tier-I Indian IT firms are favourably positioned to leverage these growth opportunities. Accenture’s expectation of growth recovery from H2FY21 is fairly aligned with our expectations for Tier-I Indian IT firms,” Mint quotes Jefferies as saying.