Shares of IT companies rose on Tuesday, led by a 5 per cent jump in Infosys on the back of its buyback plan.
Infosys, in an exchange filing on Monday after market hours, said its board will consider a proposal to buy back its shares on Thursday. The Nifty IT index rose 2.8 per cent, the highest since May 12.
Infosys was the best-performing Sensex stock and the single biggest contributor to Sensex gains.
Infosys, TCS, and HCLTech contributed the most to the index's gains.
Analysts said Infosys has underperformed its largecap peers this year, and the buyback announcement signals stability that could help rerate its multiples. On a year-to-date basis, Infosys' stock has declined 23.8 per cent. The rupee depreciation and rising bets of a US rate cut after the recent jobs report also supported a rise in IT stocks.
The US nonfarm payrolls report released last week showed that 22,000 jobs were added in August, against 79,000 in July and the 75,000 expected by analysts polled by Bloomberg.
A rate cut in the US is positive for Indian IT firms, which earn a significant portion of their revenue from the US, as it could revive technology spending.
Moreover, rate cuts in the US are positive for emerging markets like India, making them more attractive to foreign investors.Despite the gains on Tuesday, analysts remain sceptical of the sustainability of the rally in IT stocks.
-- Sundar Sethuraman, Business Standard
