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Shares of Indian IT companies, Infosys Ltd., Wipro Ltd., TCS Ltd., HCLTech Ltd., Persistent Systems Ltd. and other IT stocks surged up to 5% on Friday, October 9, reacting to multiple global and local developments that could trigger a reaction in these stocks today.
Shares of TCS are leading the gains on the Nifty IT index, with gains of 5.5%, the most in a month, while those of Mphasis, LTM, Coforge, Persistent, HCLTech, are trading with gains between 3% to 4%.
Why Did Indian IT Stocks Gained Today?
The first major development that kept Indian IT stocks in focus was majorly the H-1B developments that took place on Thursday evening.
The US Labor Department on Thursday announced that it will be suspending Microsoft and Adobe from the Permanent Labor Certification Program. The suspension of these companies is also on account of the fact that they are under multiple active Federal investigations, according to the US Labor Secretary.
Additionally, the Labor Department also said that they will not accept or process any new application from companies like Cognizant, Infosys, Capgemini, Wipro, TCS and HCLTech.
In response, IT industry body NASSCOM said that Indian IT companies have significantly reduced their dependence on the H-1B visa and they have steadily expanded local hiring to build a strong domestic workforce in the US.
The statement also added that the number of employees transitioning from H-1B to permanent residency through the PERM process is also limited.
The US-listed shares (ADRs) of both Infosys and Wipro fell as much as 4% each on these developments before staging a sharp recovery from the lows. While the Wipro ADR ended unchanged, the Infosys ADR reversed all the losses to end with gains of 1.1%.
What Triggered The Recovery In ADRs Of Infosys & Wipro?
A major reason behind the recovery could be the disclosure made by OpenAI, about its annualized revenue run-rate of $50 billion, which fell well short of the $68 billion figure that was being reported earlier.
OpenAI and the evolution of Artificial Intelligence has been the biggest reason behind the underperformance of India's software services providers, with shares declining between 30% to 35% on a year-to-date basis so far.
The disclosure made by OpenAI triggered a sell-off in all AI and chipmaking stocks with Nvidia shedding 3% and Oracle declining over 6% on Thursday. Shares of CoreWeave fell 8%, while chipmakers such as AMD, Broadcom, Intel and Super Micro also saw losses ranging from 4% to 5% each.
Adding to the recovery could have been the fact that Indian IT companies had already made this disclosure earlier this year about their limited or no dependence on the H-1B visa program anymore.
IT Stocks React To TCS Results
Indian IT companies will also be reacting to results from India's largest IT services provider Tata Consultancy Services (TCS), which reported results for the September quarter after market hours on Thursday.
Numbers across parameters for TCS were largely in-line with expectations with their AI vertical now contributing to over 10% of the company's topline. Deal wins at $9.6 billion was also in the mid-point of the $9 billion to $10 billion range that the analysts had projected.
The Nifty IT index was the only sectoral index that held out on Thursday for a better part of the session but it too fell prey to the market sell-off towards the close of trade, ending just below the flat line.
