Infosys CEO and Managing Director Salil Parekh speaks during the press conference announcing the company's quarterly results in Bengaluru, India, January 11, 2024. REUTERS/Stringer
BENGALURU (Reuters) -Indian IT companies rallied 5% on Friday after market leaders Tata Consultancy Services and Infosys posted better-than-feared quarterly reports and gave optimistic forecasts that eased concerns about a sector grappling with sluggish demand.
Market leader TCS rose more than 4%, while No.2 Infosys jumped around 8% after they reported third-quarter revenue growth that beat expectations and indicated the overall demand situation had not deteriorated further.
The 10-member Nifty IT index jumped 5% to a 21-month high, on track for its best day since July 2020 and powered the benchmark Nifty 50 to a record high.
Wipro and HCLTech, due to report results later in the day, were up about 4% and 3%, respectively.
"The results at Infosys and TCS came in a lot better than initially feared by the Street," said Apurva Prasad, vice president of institutional research at HDFC Securities.
Even their forecasts were considerably upbeat after months of warning that clients were cutting back on spending, leading to scaled-back contracts or even delays and cancellations.
Infosys said that while its total contact value fell slightly to $3.2 billion in the quarter, the share of new contracts hit a near three-year high of 71%.
"The large deals really give us good confidence of revenue over the next several periods in terms of the wins, both for net new and renewals," CEO Salil Parekh said in a post-earnings call.
TCS, meanwhile, indicated a revival in demand from banking, financial services and insurance (BFSI) clients, who account for roughly a third of revenue at top IT companies and have been their biggest pain point in recent quarters.
TCS said it expects "positive momentum" in the sector in the current quarter, given some of the deals it has won.
"With the trajectory of worst (in demand) bottoming out, and a ramp up in major deals, TCS and Infosys' exit for the fiscal year could look better," HDFC's Prasad said.
Infosys' shares rose 7.7% and were set for their best day since 2020, while TCS rose over 4% for only the third time since 2020.
(Reporting by Nandan Mandayam, Manvi Pant and Haripriya Suresh in Bengaluru; Editing by Savio D'Souza)
