IT Stocks Outlook for the week - 23.12.2013 - 27.12.2013

[K.Karthik Raja]

IT Stocks Outlook for the week - 23.12.2013 - 27.12.2013
www.rupeedesk.in

Stocks of information technology companies are likely to continue to do well in the next five sessions after the market, this week, shrugged off the much-awaited announcement of the tapering of the US Federal Reserve's $85-billion-per-month bond-buying programme.

Market sentiment was supported by an unexpected decision by the Indian central bank to keep policy interest rates unchanged--contrary to widespread expectations for an increase--as the Reserve Bank of India betted on a decline in inflation. The RBI action, which came on the same day as the US Federal Reserve's announcement of tapering, helped support the market and prevent any panic reaction.

Stocks of IT companies, whose performance is tied to US economic growth, have been on an upswing in recent weeks due to strong signals emanating from the world's largest economy, even as the broader market has seen strong volatility on domestic concerns. The sector continued to outperform the broader market last week, with the CNX IT Index rising by 6% compared with a 1.7% rise in Nifty. In the previous week, the IT index has risen by just 1.4%.

The market sentiment got boosted by data showing that foreign funds made heavy purchases in Indian stocks on Dec 19 (Thursday). In addition, positive comments from US outsourcing company Accenture helped lift IT stocks on Friday, with Tech Mahindra and Infosys hitting record highs. Despite chances of volatility due the approaching expiry of futures and options expiry on Thursday, Mangle said he expected the markets to inch higher in the coming week.

Meanwhile, Infosys is likely to be in focus on Monday due to the exit of board member and former chief of finance V. Balakrishnan. The company announced that Balakrishnan was stepping down on Friday, after being with the company for over two decades. His exit will not have any immediate impact on the business. But the stock may come under marginal pressure.