Persistent Systems, TCS, Wipro: IT stocks surge, Nifty IT index jumps 4%; here is why

The surge in IT stocks could be attributed to a fall in the Indian rupee and Republican Donald Trump's win in the US presidential elections. 

The rupee depreciated 21 paise to an all-time low of 84.30 (provisional) against the US dollar on Wednesday, as the US Dollar index rallied with Donald Trump winning the US presidential elections.

A fall in domestic currency is positive for major IT players, as they earn a substantial amount of their revenue in dollar terms. Hence, a strong dollar means more profitability. 

When the rupee appreciates against the greenback, exports become more expensive and less profitable for the domestic exporters since they end up earning fewer rupees when exchanging the dollar and vice versa.

A weaker domestic currency makes a country's exports less expensive in foreign markets, which can benefit IT firms that rely on exports for most of their revenue.

Secondly, Donald Trump in his election campaign promised a cut in corporation tax from 21% to 15% for companies that make their products in the US. This, as per analysts, can lead to more disposable income for consumers. 

More disposable income means more spending by the consumers, thus giving impetus to the overall economy. 

Besides, the Indian IT sector outlook is robust. 

Despite global economic uncertainties, the 2024 IT Sector Report highlights that businesses are committed to increasing their IT spending to drive innovation and maintain competitive advantage. The Indian information technology sector in 2024 is set to thrive, with substantial investments in emerging technologies such as AI, IoT, and cloud computing, notes Wright Research in its latest report.