IT stocks having their own Chandrayaan-3 moment. Did you miss the fineprint in Q1 results?

Frontline IT companies report mixed Q3 earnings, but analysts anticipate a recovery in the next few quarters as green shoots emerge. TCS sees pent-up demand and growth in banking and financial services, while Infosys has deal ramp-ups on schedule. HCLTech observes green shoots in ER&D and expects strong deal bookings. Wipro notes demand stabilization and slight pick-up in discretionary spending.

Rahul Jain of Dolat Capital believes that long-term investors are giving up on the upside in largecap stocks due to disappointing results. Infosys, in particular, has cut its guidance for the second quarter in a row, indicating more pressure ahead. Jain explains that the revenue growth is not translating from the order book due to delayed starts and a decrease in discretionary spending by clients. He expects a severe cut in stock prices and suggests that midcap stocks with better execution may face more pressure compared to tier I stocks.

Latest shareholding pattern shows that FIIs pared their stake in Infosys by 120 bps to 35.09% in March quarter and in the case of bellwether Tata Consultancy Services (TCS) their holding went down by 22 bps to 12.72%.

Despite concerns about global slowdown and earnings growth risks, the information technology (IT) sector has contributed significantly to the benchmark Nifty 50's gains in the last six months. IT stocks have outperformed banks and helped the index surpass the 20,000-mark. Eight out of ten constituents of the Nifty IT index have delivered double-digit returns. The gains have been driven by short covering and fresh bullish positions. The sustainability of this momentum will depend on the September quarter results and guidance for the second half of FY24.

FIIs and mutual funds increase their shareholding in IT stocks as growth momentum may bottom out, leading to a return to growth in CY24. MF holding in Tech Mahindra rises to 14.24% in Q4. FIIs and MFs raise stake in Wipro. FIIs show faith in HCL Technologies and LTI Mindtree. MFs pare stake in Infosys, while FII ownership increases. TCS sees no change in shareholding. BNP Paribas says revenue and margin of top IT companies exceed expectations. Companies' guidance and positive tilt indicate a recovery. Nifty IT index rallies in November, December, and January. BNP Paribas picks Infosys, TCS, and HCL Tech as preferred picks.

Institutional investors such as foreign portfolio investors and mutual funds have increased their stakes in at least 20 Indian stocks in the past three quarters, but only 10 of these investments have yielded double-digit returns in FY23. The stocks that have rewarded the institutional investors include L&T Finance Holdings, Maharashtra Scooters, Arvind Smartspaces, Devyani International, Syngene International, BHEL, Hikal, Mayur Uniquoters, Tata Coffee, and Natco Pharma. Only stocks with a market capitalisation of at least INR 500 crore are included in the study.

India Business News: Weak earnings from Tata Consultancy Services and Infosys, along with commentary about concerns over tech spending in the US and Europe dragged IT stoc

Nifty 50 has managed to retrace its 12 week decline (18,252-16,828) in just six weeks. The index is expected to go through a healthy consolidation.

Despite muted earnings in the previous quarter and little expectations of major recovery in the next quarter, what is driving the rally in tech stocks? The answer lies in FY25, on which everyone is pinning their hopes.

Buy or sell stocks: Ruchit Jain of 5paisa has recommended two stocks to buy this week - Tata Chemicals Ltd and Max Financial Services Ltd.