Despite a third consecutive fall in services PMI in April, large-to-mid-sized IT stocks rallied on Monday as traders cheered better-than-expected US employment data, a prominent market for the IT service providers.
Market experts also attributed the gains to a rebound from a recent correction after traders turned cautious on the impact of a proposed US immigration Bill, which may affect margins of IT companies.
Amid a muted market, TCS rallied as much as 3.5% on BSE before ending the session at R1,464.85, up R46.1, or 3.2%, after Friday’s data release showed that the US economy churned out higher-than-expected jobs in April even as the unemployment rate fell to its lowest since 2008. Infosys, Tech Mahindra and Mindtree advanced 1-2%.
After consistently outperforming the market, IT stocks have taken a beating since mid-April due to disappointing revenue guidance by Infosys. They were further pulled down by worries related to an overhaul of the US immigration law as the draft Bill suggests imposition of higher fee for H1B category of visa, used extensively by Indian IT companies.
As a result, CNX IT ? the sectoral index on the NSE ? dropped as much as 17% in two weeks even as benchmark indices gained 5% during the period.
?Going ahead, concerns over immigration law may act as an overhang for these stocks even as it may take 6-8 months before the final form of the draft Bill emerges, as per Nasscom estimates,? said an analyst.
On Friday US labour department reported creation of more than expected 1.65 lakh jobs in April, and also made upward revisions to previous two months? data by 1.14 lakh jobs. The unemployment rate dropped from 7.6% in March to 7.5%, its lowest standing since December 2008.
