India’s benchmark indices reached fresh highs on Friday, propelled by gains in Tata Consultancy Services (TCS), a day after the IT bellwether reported a better-than-expected performance for Q1FY25.
Robust buying by foreign portfolio investors (FPIs) and a cooling of US inflation that stoked hopes of an early rate cut by the Federal Reserve also helped the indices post consecutive six weeks of gains — their longest weekly winning streak since December 15, 2023 (seven weeks of gains).
The Sensex soared to 80,894 before conceding some of its gains, ending the session at 80,519 — a rise of 622 points, or 0.8 per cent. The Nifty 50 similarly ended the session at 24,502, climbing 186 points, or 0.7 per cent. Both indices climbed new peaks, both intraday and at the close.
Over the course of the week, the Sensex and Nifty each rose by 0.7 per cent.
TCS was the star performer, surging by 6.7 per cent, making it both best-performing stock on the Sensex and largest contributor to its gains. The latest uptick was TCS’ most significant single-day gain since October 15, 2020. The IT titan’s stock surged after its first-quarter results for 2024-25 surpassed analyst expectations.
The Nifty IT index, on Friday, rose 4.53 per cent; it climbed 3.45 per cent during the week.
For the first quarter of 2024-25, TCS reported an 8.7 per cent year-on-year increase in net profit, reaching Rs 12,040 crore, while revenue grew by 5.4 per cent year-on-year and 2.2 per cent sequentially to Rs 62,613 crore. These figures beat Bloomberg’s consensus estimates, which had pegged revenue at Rs 62,128 crore and profit at Rs 11,959 crore. Analysts described gains in TCS as a relief rally, given prevailing concerns about the IT sector’s performance amid a global market slowdown.
The moderation in US inflation raised hopes for at least two rate cuts by the Federal Reserve this year. The core consumer price index in the US rose by only 0.1 per cent from the previous month — the smallest increase in three years — primarily due to a slowdown in housing costs. This, coupled with tepid payroll growth, is expected to prompt US monetary policymakers to begin cutting rates as early as September. Federal Reserve Bank of Chicago President Austan Goolsbee said that the recent inflation data suggests that the US central bank is on track to achieve its 2 per cent target. However, he refrained from speculating on the timing of the first rate cut.
In India, the equity market is largely on an upward trajectory after a brief but sharp decline on the day of the Lok Sabha election results, buoyed by hopes of policy continuity and strong macroeconomic indicators. Since June 4, the Sensex has hit intraday highs 15 times and closed at new highs on 14 occasions. The Nifty 50 has hit intraday highs 17 times and ended the session at new highs 15 times.
The trajectory of the market will now depend on whether the FPI flows continue, said analysts. “FPIs are probably reallocating to India. Most of the good news has been priced in, but the potential inflow of FPIs has not been priced in. Until now, the rally has been supported by domestic investors. If FPIs join the party, it can go up further,” said U R Bhat, co-founder of Alphaniti Fintech.
According to provisional data from exchanges, FPIs were net buyers to the tune of Rs 4,021 crore on Friday. Despite the bullish market, the breadth was weak, with 2,325 stocks declining and 1,624 advancing.
Vinod Nair, head of research at Geojit Financial Services, remarked” “We expect stock-specific moves to gain traction due to the ongoing earnings season. Indeed, IT stocks will be in the limelight due to the good start to the earnings season and the outlook.”
First Published: Jul 12 2024 | 9:15 PM IST
