Many IT stocks saw a boost on Friday, September 27, as the Nifty IT index rose nearly 3%. This increase followed Accenture’s better-than-expected Q4 FY24 results and positive revenue growth outlook for FY25. Accenture operates on a September-August financial year.
Several IT companies, such as Coforge, HCL Technologies, and Persistent Systems, reached new 52-week highs. By around 11:35 am, the Nifty IT index was up by 1%, with all its components in the green.
Accenture announced a $4 billion share buyback and reported strong revenue, thanks to rising demand for generative artificial intelligence technology. The company also raised its annual revenue growth forecast for 2025 to 3-6% due to improved economic conditions and a recent 50 basis points interest rate cut by the US Federal Reserve.
Accenture’s results are closely watched by investors as the company is a leader in IT services and consulting, often serving as a bellwether for the sector.
Positive Outlook for Indian IT?
Experts are optimistic about the future of the Indian IT sector following Accenture’s results. However, they advise investors to choose their stocks carefully.
Manish Chowdhury from StoxBox believes that most negative factors affecting IT spending are already priced into the sector. He noted, “With Accenture showing confidence in growth prospects, we expect to see a gradual recovery across various sectors.” He added that the US rate cut could lead to increased spending and more deals.
Chowdhury thinks the overall outlook is positive for the medium to long term, as companies have optimized their operations and are moving towards new technologies. He believes that while the sector’s valuation isn’t very attractive, there won’t be a significant correction in prices, and he expects increased foreign investments.
Kunal Mehta from Equirus pointed out that Accenture’s strong orders in managed services bode well for Indian IT. However, he cautions about the cautious spending approach from clients, despite expectations for revenue growth in consulting.
Nuvama Wealth Management noted that Accenture’s growth in consulting and outsourcing is a good sign for Indian IT services, indicating a recovery in discretionary spending. They maintain a positive outlook for the sector, expecting strong demand to drive growth over the next three years.
According to Emkay Global Financial Services, Accenture’s guidance suggests a steady start to FY25, with a growth forecast of 3-6%. They believe that increased tech spending in 2025 will depend on confidence in the US economy after the interest rate cuts.
Top IT Stocks to Consider
Emkay recommends large-cap stocks like Infosys, HCL Tech, Tech Mahindra, TCS, Wipro, and LTIMindtree. For mid-caps, they suggest eClerx Services, Cyient, Birlasoft, and Firstsource Solutions.
JM Financial Services advises investors to consider taking profits from sharp rises in IT stocks, particularly in companies with uncertain earnings visibility or valuation comfort, recommending Infosys, Wipro, and Tech Mahindra as top large-cap picks.
Prabhudas Lilladher has a ‘buy’ rating on HCL Technologies (target price: ₹1,790) and ‘accumulate’ ratings for TCS (target price: ₹4,370), Persistent Systems (target price: ₹5,320), LTIMindtree (target price: ₹6,040), and Cyient (target price: ₹2,130).
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