Traders are showing unexpected confidence in IT stocks ahead of the fourth-quarter results season, cutting bearish bets and adding fresh long positions before Tata Consultancy Services kicks off earnings on Thursday. According to reports from The Economic Times, this shift marks a departure from earlier expectations that short positions would dominate the sector amid concerns over AI-led disruption. The renewed bullishness appears to reflect expectations linked to the West Asia conflict, which has pushed up energy prices, as noted by Rajesh Palviya, head of Technical and Derivatives Research at Axis Securities. The latest developments show traders responding positively to news of a potential ceasefire, with US-Iran tensions easing after Trump announced a two-week truce.
The Nifty IT index rose 2.5% on Tuesday, making it the top sectoral gainer, while the Nifty ended 0.7% higher at 23,123.65. As reported by The Economic Times, Mphasis surged 4.2%, followed by Wipro and LTIMindtree, which gained 3.4-3.7%. From its recent low of 28,288 on March 17, the Nifty IT index has gained over 11% compared with the 2% decline in the Nifty. This recovery has been supported by visible short covering in midcap IT stocks, while large-cap IT names are witnessing fresh long buildup. The positive sentiment in IT stocks has been further bolstered by the recent developments in the US-Iran situation.
Wall Street analysts have raised forward earnings estimates across the technology sector, with the consensus figure increasing from 34% to 45% for Q1 earnings growth, according to FactSet Research. No stock market sector has seen a sharper upward revision to forward earnings estimates, creating a buying opportunity despite the technology sector being the third-worst performing market sector year to date. The upward revisions have been particularly pronounced in four AI stocks: Sandisk, Micron Technology, Nvidia, and Palantir Technologies. Micron's median target price of $550 per share implies 50% upside from its current $366, while Nvidia's median target price of $265 per share also implies 50% upside from its current $177.
Infosys, HCL Technologies and Wipro will report earnings later in April, with TCS's earnings commentary being crucial to confirm investors' newfound confidence in the sector. As reported by The Economic Times, following the recent correction, the market appears to be gradually reassessing the space, with large-cap players such as TCS and Infosys, supported by strong balance sheets, remaining better positioned to invest in AI capabilities and navigate this transition. With valuations now more attractive after the decline, IT is increasingly being viewed as a contrarian opportunity, particularly as Wall Street maintains a consensus estimate that the S&P 500 will reach 8,330 in the next year, implying 26% upside from current levels.
