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Economic Times
12 hours ago
- Business
- Economic Times
IT stocks up 35% in less than 2 months. Can it withstand Fed caution and geopolitical risk?
Fed Pushes Back on Rate Cuts Live Events Geopolitical Risks Tariff Threats Outlook (You can now subscribe to our (You can now subscribe to our ETMarkets WhatsApp channel After a sharp sell-off earlier this year, Indian IT stocks have delivered a striking comeback. The Nifty IT index has surged 10.5% in under two months, with several individual stocks posting even stronger gains. But with global headwinds intensifying—from a cautious US Federal Reserve to rising geopolitical tensions—the sustainability of this rally is now in question. Coforge has rallied nearly 35%, while Tech Mahindra and LTIMindtree are up 28% each. Persistent Systems Oracle Financial Services Software (OFSS), and Mphasis have posted gains of 16% to 22%. Even large-caps like Infosys and Wipro delivered double-digit returns in the same the rebound is starting to face resistance. Following the US Fed 's June policy meeting, the Nifty IT index slipped nearly 1%, signalling renewed caution among Federal Reserve kept its benchmark rate unchanged in June but raised its core PCE inflation projection—its preferred inflation measure—from 2.8% to 3.1% for 2025. Headline PCE is now expected to reach 3%, up from earlier estimates, indicating that price pressures are proving persistent.'The Federal Reserve's decision to hold interest rates steady comes as no surprise, given the persistent inflationary pressures in the U.S. economy,' said Suresh Darak, Founder, Bondbazaar. 'These pressures were... exacerbated by global conflicts pushing up oil prices and sustaining inflation.'At the same time, US GDP growth expectations have been revised down to 1.4%, raising concerns about delayed tech spending by large clients. 'Growth and inflation outlook is at loggerheads at this moment,' said Vaqarjaved Khan, Senior Fundamental Analyst at Angel One. 'Markets are interpreting this tone as somewhat hawkish.'With only one rate cut now likely in FY26, Indian IT companies that rely on US enterprise spending may see continued pressure on deal as rate uncertainty builds, global tensions are driving a fresh spike in oil prices. Over the last week, conflict between Iran and Israel has intensified, and there are fears that the US may get involved. Iran's Supreme Leader has threatened to block the Strait of Hormuz, a vital passage for nearly 20% of the world's oil shipments, while US President Donald Trump has hinted at a more aggressive US a result, Brent crude prices jumped more than 18% to $79, while WTI rose 18.5% to $75.7 over just seven trading Indian IT firms, a prolonged oil rally could lead to higher inflation globally, currency volatility, and tighter tech budgets for energy-sensitive risks are also back in focus as the US heads toward its presidential election. Fed Chair Jerome Powell recently warned that 'tariff effects on inflation can be persistent,' sparking concern for Indian IT exporters that depend on stable global trade flows.'Going forward, if the US Fed delivers a 50-bps rate cut in 2025, it would increase liquidity in the global markets,' said Khan. 'However... Middle East tension and tariff-related announcements by the US... could increase inflation expectations globally. If any of these risks play out at a larger extent, the upside scenario in Indian equities might get halted.'The recent 35% rally in IT stocks has been driven in part by easing attrition, improving margins, and hopes of a demand revival. But with the Fed turning cautious and geopolitical risks rising, the sector's near-term trajectory looks uncertain.'Jerome Powell's comment that 'despite heightened uncertainty, the economy is in solid position' is important. However, he has warned that 'tariff effects on inflation can be persistent'... With only 1.4% GDP growth expected this year, the US is unlikely to attract a lot of capital flows,' said Dr. VK Vijayakumar, Chief Investment Strategist, Geojit IT names like LTIMindtree and Tech Mahindra dropped over 3% in a single session on June 19—reflecting the sector's sensitivity to global IT index's sharp bounce from its early-2025 lows shows that investors remain optimistic about long-term fundamentals. However, the path forward is likely to be sticky inflation, oil-driven macro risks, tariff uncertainty, and a cautious Fed, the sector's recovery rally faces real tests. Whether the momentum can continue—or gives way to another round of selling—may depend on how these risks evolve over the next quarter.: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)
Time of India
12 hours ago
- Business
- Time of India
IT stocks up 35% in less than 2 months. Can it withstand Fed caution and geopolitical risk?
Coforge has surged nearly 35%, with Tech Mahindra and LTIMindtree each rising 28%. Persistent Systems, HCLTech, Oracle Financial Services Software (OFSS), and Mphasis have recorded gains between 16% and 22%. Even large-cap players like Infosys and Wipro have delivered double-digit returns during the same period. Tired of too many ads? Remove Ads Fed Pushes Back on Rate Cuts Tired of too many ads? Remove Ads Tariff Threats Tired of too many ads? Remove Ads Outlook After a sharp sell-off earlier this year, Indian IT stocks have delivered a striking comeback. The Nifty IT index has surged 10.5% in under two months, with several individual stocks posting even stronger gains. But with global headwinds intensifying—from a cautious US Federal Reserve to rising geopolitical tensions—the sustainability of this rally is now in question. Coforge has rallied nearly 35%, while Tech Mahindra and LTIMindtree are up 28% each. Persistent Systems Oracle Financial Services Software (OFSS), and Mphasis have posted gains of 16% to 22%. Even large-caps like Infosys and Wipro delivered double-digit returns in the same the rebound is starting to face resistance. Following the US Fed 's June policy meeting, the Nifty IT index slipped nearly 1%, signalling renewed caution among Federal Reserve kept its benchmark rate unchanged in June but raised its core PCE inflation projection—its preferred inflation measure—from 2.8% to 3.1% for 2025. Headline PCE is now expected to reach 3%, up from earlier estimates, indicating that price pressures are proving persistent.'The Federal Reserve's decision to hold interest rates steady comes as no surprise, given the persistent inflationary pressures in the U.S. economy,' said Suresh Darak, Founder, Bondbazaar. 'These pressures were... exacerbated by global conflicts pushing up oil prices and sustaining inflation.'At the same time, US GDP growth expectations have been revised down to 1.4%, raising concerns about delayed tech spending by large clients. 'Growth and inflation outlook is at loggerheads at this moment,' said Vaqarjaved Khan, Senior Fundamental Analyst at Angel One. 'Markets are interpreting this tone as somewhat hawkish.'With only one rate cut now likely in FY26, Indian IT companies that rely on US enterprise spending may see continued pressure on deal as rate uncertainty builds, global tensions are driving a fresh spike in oil prices. Over the last week, conflict between Iran and Israel has intensified, and there are fears that the US may get involved. Iran's Supreme Leader has threatened to block the Strait of Hormuz, a vital passage for nearly 20% of the world's oil shipments, while US President Donald Trump has hinted at a more aggressive US a result, Brent crude prices jumped more than 18% to $79, while WTI rose 18.5% to $75.7 over just seven trading Indian IT firms, a prolonged oil rally could lead to higher inflation globally, currency volatility, and tighter tech budgets for energy-sensitive risks are also back in focus as the US heads toward its presidential election. Fed Chair Jerome Powell recently warned that 'tariff effects on inflation can be persistent,' sparking concern for Indian IT exporters that depend on stable global trade flows.'Going forward, if the US Fed delivers a 50-bps rate cut in 2025, it would increase liquidity in the global markets,' said Khan. 'However... Middle East tension and tariff-related announcements by the US... could increase inflation expectations globally. If any of these risks play out at a larger extent, the upside scenario in Indian equities might get halted.'The recent 35% rally in IT stocks has been driven in part by easing attrition, improving margins, and hopes of a demand revival. But with the Fed turning cautious and geopolitical risks rising, the sector's near-term trajectory looks uncertain.'Jerome Powell's comment that 'despite heightened uncertainty, the economy is in solid position' is important. However, he has warned that 'tariff effects on inflation can be persistent'... With only 1.4% GDP growth expected this year, the US is unlikely to attract a lot of capital flows,' said Dr. VK Vijayakumar, Chief Investment Strategist, Geojit IT names like LTIMindtree and Tech Mahindra dropped over 3% in a single session on June 19—reflecting the sector's sensitivity to global IT index's sharp bounce from its early-2025 lows shows that investors remain optimistic about long-term fundamentals. However, the path forward is likely to be sticky inflation, oil-driven macro risks, tariff uncertainty, and a cautious Fed, the sector's recovery rally faces real tests. Whether the momentum can continue—or gives way to another round of selling—may depend on how these risks evolve over the next quarter.: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)
Mint
2 days ago
- Business
- Mint
Indian stock market: Mid-cap magic drives index 20% higher in just 4 months. Will this breakneck rally extend or end?
Mid-cap stocks outlook: Buoyed by improving investor sentiment and a renewed appetite for risk, mid-cap stocks have taken centre stage on Dalal Street. The Nifty Midcap 100 index has surged nearly 20% over the past four months, driven by strong earnings growth and a shift in market leadership. Q4 FY25 marked a clear turning point, with mid-caps outshining both large and small-caps on the earnings front. The Motilal Oswal Midcap universe reported 19% YoY PAT growth—nearly double that of large-caps and well ahead of small-caps. Amid a volatile start to the year, amid tariff uncertainty, foreign investor outflows, and broader economic concerns, the Nifty Midcap 100 is just 1% higher YTD, yet, within the index, select stocks have soared up to 75% in 2025—led by defence counters. Top gainers include Solar Industries, Bharat Dynamics, Mazagon Dock, and Cochin Shipyard, with support from BSE, SBI Cards, and Aditya Birla Capital, reflecting broad-based participation across sectors. This rally also coincides with the return of foreign institutional investor (FII) inflows, totalling ₹ 11,544 crore, alongside 23 consecutive months of domestic institutional investor (DII) buying. "Overall domestic flows have been strong in June and 2025. In June, around ₹ 50,000 crore of stocks have been bought by DIIs, and the trend has remained the same for 2025 as well. Out of this, 34-40% of the flows have gone into mid-cap stocks," said Vaqarjaved Khan, Sr. Fundamental Analyst, Angel One Ltd, pegging it as one of the key reasons behind the rise in mid-cap stocks. Encouraging Q4 earnings results from several companies, particularly in the mid-cap space, have boosted investor confidence and driven buying interest, opined Avinash Pathak, Analyst at LKP Securities. According to a Motilal Oswal report, the midcap space saw a favourable upgrade cycle this quarter, reversing the downgrade-heavy trend seen in the past three quarters, signalling improved earnings visibility and greater investor confidence. A healthy Indian economy and RBI rate cut are among other factors that Pathak believes lend support to the mid-caps. With many factors aligning for the rally in mid-cap stocks, the key question remains how long this trend will sustain, as valuations are becoming stretched following such a sharp rise. The Nifty Midcap 100 index, at around 29.3x FY26 estimated earnings, is trading at a premium to its 10-year average. This raises concerns about overvaluation in certain pockets, especially if earnings growth doesn't keep pace, said LKP Securities' Pathak. He added that we have already seen instances of profit booking in small and mid-cap stocks after multi-day rallies, suggesting that investors are becoming watchful of valuations. Even today (June 19), the Nifty Mid-cap 100 is down for the third day, underperforming the benchmark, as the Iran-Israel conflict hammers sentiment. "The sustainability will largely depend on continued strong earnings growth and margin stability for mid-cap companies. Any disruption in global demand or resetting of cost bases could impact this," Pathak opined. He advised focusing on fundamentally strong mid-cap companies with good earnings visibility, lower debt, and sectoral tailwinds, which will be crucial rather than a broad-based approach. As per ICICIDirect, Nifty midcap is undergoing a healthy retracement after a 28% rally, which should be used as a buying opportunity based on a few factors. "Since the April low, the midcap index has not corrected >6% while on the weekly chart it has not closed below its previous week's low. In the current scenario, despite ongoing volatility, the midcap index has been maintaining the same rhythm. Further, the ratio chart of Nifty 500/Nifty 100 has been inching upward, which indicates relative outperformance," the brokerage said. Motilal Oswal also believes that midcaps are no longer just a beta play—they are increasingly becoming alpha generators. Their ability to adapt, diversify, and scale across core economic themes like electrification, infrastructure, and financial inclusion reinforces their relevance in long-term portfolios, it added. Angel One's Vaqarjaved Khan recommended being watchful and selective. "Over the next one year, the outperformance can continue if global macro holds stable, corporate earnings delivery happens, and Government spending momentum continues. Avoid stocks that have stretched valuations compared to their historical averages and peers," Khan added. Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
Time of India
12-06-2025
- Business
- Time of India
Paint companies face profitability challenges amidst high competition
MUMBAI: Investor woes in shares of paints companies may be far from over as the hyper competition in the sector and tepid demand are expected to continue squeezing profitability in the sector. With valuations remaining elevated despite the recent underperformance in the shares, money managers and analysts are less enthusiastic about their prospects in the foreseeable future. So far in 2025, Asian Paints is down 4.2% and Kansai Nerolac has fallen 4.5%. Berger Paints bucked the trend, rising 24%. In comparison, the Nifty 50 is up 6%. Morgan Stanley said this 'de-rating' is not yet done. "While there is consensus on the sell side on growth and ratings, we think the exact extent of a potential de-rating for paint stocks is not yet understood," said the brokerage in a recent note. The apathy for paints shares among investors and analysts is a contrast to the situation three years ago when they were Dalal Street darlings for over a decade. The entry of deep-pocketed players like the Aditya Birla Group into the sector has resulted in companies focussing on fighting for market share, putting pressure on profitability. "The overall competitive intensity will remain high for the next two years," said Aniruddha Kekatpure, head of research at Edelweiss Mutual Fund . "If the new entrant executes better than expected, the stock prices of incumbents will likely continue to languish." The recent declines in paint shares have removed some froth of their valuations, which were considered among the most expensive in the consumer-facing businesses. "While valuations have moderated from their post-COVID highs, they continue to remain elevated amid persistent growth and margin pressures," Vaqarjaved Khan, senior fundamental analyst at Angel One. Khan said the estimated Price to Earnings (P/E) ratio - a popular valuation measure - for most paint companies still hovers around 48-55x, a rich multiple, especially when the growth outlook for FY26 appears clouded.
Economic Times
12-06-2025
- Business
- Economic Times
Paint companies face profitability challenges amidst high competition
The recent declines in paint shares have removed some froth of their valuations, which were considered among the most expensive in the consumer-facing businesses. Investor concerns persist for paint companies due to intense competition and weak demand, impacting profitability. Despite recent share underperformance, valuations remain high, leading to analyst caution. The entry of new players like Aditya Birla Group intensifies the fight for market share, further pressuring margins and potentially causing incumbent stock prices to struggle. Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads Mumbai: Investor woes in shares of paints companies may be far from over as the hyper competition in the sector and tepid demand are expected to continue squeezing profitability in the sector. With valuations remaining elevated despite the recent underperformance in the shares, money managers and analysts are less enthusiastic about their prospects in the foreseeable far in 2025, Asian Paints is down 4.2% and Kansai Nerolac has fallen 4.5%. Berger Paints bucked the trend, rising 24%. In comparison, the Nifty 50 is up 6%.Morgan Stanley said this 'de-rating' is not yet done."While there is consensus on the sell side on growth and ratings, we think the exact extent of a potential de-rating for paint stocks is not yet understood," said the brokerage in a recent apathy for paints shares among investors and analysts is a contrast to the situation three years ago when they were Dalal Street darlings for over a decade. The entry of deep-pocketed players like the Aditya Birla Group into the sector has resulted in companies focussing on fighting for market share, putting pressure on profitability. "The overall competitive intensity will remain high for the next two years," said Aniruddha Kekatpure, head of research at Edelweiss Mutual Fund. "If the new entrant executes better than expected, the stock prices of incumbents will likely continue to languish."The recent declines in paint shares have removed some froth of their valuations, which were considered among the most expensive in the consumer-facing businesses."While valuations have moderated from their post-COVID highs, they continue to remain elevated amid persistent growth and margin pressures," Vaqarjaved Khan, senior fundamental analyst at Angel One. Khan said the estimated Price to Earnings (P/E) ratio - a popular valuation measure - for most paint companies still hovers around 48-55x, a rich multiple, especially when the growth outlook for FY26 appears clouded.
