HCL Tech, Tech Mahindra drive Nifty IT 6% higher. What should traders do?

IT stocks witnessed strong buying interest last week with the NIFTY IT index rising 6.5%, outperforming the benchmark NIFTY50 index which gained 0.7% during the same period. IT stocks were in the spotlight after heavyweights like HCL Tech, Tech Mahindra and LTI Mindtree reported their Q4 results.

All three companies reported results in line with market estimates. However, HCL Tech's optimistic FY26 revenue growth guidance of 2% to 5% YoY and upbeat management commentary triggered positive sentiments in the sector.

Tech Mahindra led the gains with a gain of 11.8% while HCL Tech, LTI Mindtree, Infosys and TCS gained between 4% and 9.7%. Market sentiment was also buoyed by U.S. President Donald Trump's statement that he plans to reduce some tariffs on China, easing fears of a U.S. recession and global economic slowdown.

Revenue growth guidance within the IT pack varies, reflecting different market conditions and strategic approaches. HCL Tech's revenue guidance of 2% to 5% is a cautious but optimistic outlook amid global economic uncertainties. However, Infosys has offered a more conservative forecast, expecting flat to 3% growth for the same period. In contrast, Wipro has given the weakest guidance, expecting a sequential revenue decline of -3.5% to -1.5% in Q1 FY26. Meanwhile, TCS continues its practice of not providing specific revenue guidance.

Key stocks on radar

1. HCL Technologies rebounded above its 21-day and 50-day exponential moving averages, reclaiming the key resistance level of ₹1,509. The stock is now approaching a major hurdle at the 200-day EMA, which coincides with the crucial resistance zone of ₹1,659. In the upcoming sessions, traders should watch the range of 200 EMA and 21 EMA. A break above these levels on a closing basis will provide further directional clues. Until then, the stock may consolidate its recent gains.
2. Tech Mahindra rallied over 6% from Friday's low and regained its 21-day and 50-day EMAs on the daily chart. It held its key support zone between ₹1,385 and ₹1,419 on a closing basis, sustaining its bullish momentum. The stock is now moving towards the next major resistance at the 200-day EMA and the ₹1,600 zone. In the near term, traders should keep a close eye on the ₹1,385-₹1,419 support range. As long as the stock remains above this zone on a closing basis, the bullish trend is likely to continue.

Bullish outlook on HCL Technologies, Tech Mahindra and Mphasis

Traders who have a bullish outlook on HCL Technologies, Tech Mahindra and Mphasis can consider a long call strategy to benefit from further upside. Let's understand this strategy using Tech Mahindra as an example:

Tech Mahindra closed at ₹1,462 on Friday with an at-the-money (ATM) strike of 1,460. The options contracts of the stock expire on 29 May. Traders expecting stock to show further strength on the bullish outlook may consider a long call strategy.

The break-even point for the April ATM call is 3.5% above the last close. This means, a sustained move above this level would make the strategy profitable.

Meanwhile, traders seeking an alternative to simple option buying can also consider spread strategies like bull call spread . This strategy involves buying a call option while simultaneously selling a higher strike call with the same expiration, reducing cost while capping potential gains.

Range-bound outlook on HCL Technologies, Tech Mahindra and Mphasis

Traders expecting range-bound movement after a sharp upside movement may consider an iron condor strategy. It’s most effective when the stock stays within the range of short call and short put strike prices.

Conclusion

In summary, a long-call strategy benefits if the share price gains and moves upward. Options offer the flexibility to capitalise on different market conditions—whether bullish, bearish, or range-bound. However, past performance does not guarantee future results. It’s essential to evaluate risks carefully and have a well-defined risk management plan before executing any strategy.