Indian information technology (IT) stocks experienced a significant rally on Friday, with the Nifty IT index climbing over 2.35% in early trade. This surge was led by Mphasis Ltd., which saw its shares jump as much as 8% to Rs 2,712.
The rally comes amidst a global selloff in artificial intelligence (AI)-linked stocks, prompting investors to reassess their allocations and consider other markets, including India. Other major IT firms also saw substantial gains: HCL Technologies Ltd. advanced over 2.5% to Rs 1,468, while Persistent Systems Ltd. rose more than 2%. Large-cap giants Infosys Ltd. and Tata Consultancy Services Ltd. (TCS) each gained up to 3%. Coforge Ltd. and Wipro Ltd. climbed more than 1%, with Tech Mahindra and LTM also trading higher. Oracle Financial Services Software was an outlier, declining nearly 2%.
Global AI Selloff Fuels Investor Reallocation
The market movement reflects investors' assessment that the sharp correction in global AI stocks could trigger a shift in capital towards more diversified markets. Wall Street recently saw over $2 trillion in market value wiped out, and technology-heavy Asian markets also recorded steep losses. These downturns are attributed to growing concerns over potential AI regulation and questions regarding the sustainability of current AI infrastructure spending.
Adding to the positive sentiment for Indian equities, provisional data indicated that foreign portfolio investors (FPIs) purchased Indian stocks worth Rs 13,801.83 crore on Thursday, providing a strong signal of renewed international interest.
Expert Insights on Market Shift
VK Vijayakumar, Chief Investment Strategist at Geojit Investments, commented on the situation, stating, "This tech rout, particularly the sharp deceleration in AI trade will turn out to be beneficial for India."
However, uncertainty persists regarding AI regulation and overall global technology spending. Nomura noted that a federal AI data center moratorium is unlikely, though temporary pauses at the state level remain a possibility. Key issues influencing the sector include power costs, regulatory oversight, semiconductor supplies to China, and the future of export controls on chipmaking equipment.
Hemang Gor, Senior Research Analyst – Derivatives and Technical Research at Axis Direct, further highlighted the global technology selloff, citing "concerns over potential curbs on AI data centres" as a primary driver.
Outlook for Indian IT Stocks
The sustainability of this rally in Indian IT stocks will largely depend on whether global investors continue to shift their allocations towards emerging markets and if concerns surrounding AI spending begin to ease. Broader market sentiment will also be influenced by developments in crude oil prices, US monetary policy, and the performance of global technology stocks.