IT stocks surge, led by Infosys, as its board to consider share buyback on Thursday

Shares of information technology (IT) companies were witnessing strong buying interest on Tuesday, September 9, on account of a spillover effect after the country's second-largest IT company, Infosys, post-market hours on Monday said its board will meet on Thursday, September 11, to consider a share buyback proposal.

The measure of IT stocks on the National Stock Exchange, the NIFTY IT index, rose as much as 2.10%, or 723 points, to hit an intraday high of 35,034. All 10 stocks in the NIFTY IT index were trading higher, led by Infosys' over 4% gain. Wipro, Tech Mahindra, Coforge, Persistent Systems, Mphasis, HCL Technologies and LTI Mindtree also rose between 1.16% and 2.4%.

If approved by Infosys' board of directors, it will be the country's fifth share buyback.

Infosys launched its first share buyback in 2017, valued at ₹13,000 crore. The tender offer was executed at a price of ₹1,150 per share, enabling Infosys to repurchase around 11.3 crore shares.

The company announced its second buyback in 2019 when it repurchased shares worth ₹8,260 crore.

Continuing its policy of returning surplus cash, Infosys announced another open market buyback in 2021. The size was pegged at ₹9,200 crore, with a maximum price of ₹1,750 per share. This came at a time when the IT sector was witnessing robust demand amid global digital transformation.

The last buyback was conducted by the company in 2022 when it bought back shares worth ₹9,300 crore at ₹1,850 per share. Companies conduct share buybacks to reward shareholders by buying back shares and returning excess cash on their books to investors. The share buyback price is generally at a premium to the prevailing market price.

Meanwhile, the falling rupee against the US dollar is also aiding buying interest toward IT stocks, as higher rupee depreciation leads to higher margins and increased revenue for IT companies.

Last week, the rupee touched an all-time low of 88.38 against the dollar as higher trade tariffs imposed by the US on Indian goods and the continuous exodus of foreign flows continue to weigh on sentiment.