Indian IT stocks experienced a notable surge in early trading, with the Nifty IT sub-index climbing nearly 4 percent. This rebound saw prominent companies like Infosys Ltd, Tata Consultancy Services Ltd (TCS), HCLTechnologies Ltd, Tech Mahindra Ltd, and Wipro Ltd all registering gains.
Value Buying Fuels IT Sector Recovery
The broader rally extended to other key IT players, including Coforge Ltd, Persistent Systems Ltd, Oracle Financial Services Software Ltd (OFSS), LTM Ltd (formerly LTIMindtree), and Mphasis Ltd, which also traded higher during the session. Analysts suggest that this ongoing pullback in the IT sector is providing crucial support for the benchmark Nifty50 to maintain levels above 23,600.
Kranthi Bathini, Equity Strategist at WealthMills Securities, highlighted that the recovery in the IT index was largely driven by value buying following a period of sharp correction. He advised investors to adopt a 'buy-on-dips' strategy as the sector shows signs of recovery.
Generative AI Adoption Drives Long-Term Optimism
Nuvama Institutional Equities expressed a positive outlook on the Indian IT sector, believing it is on a path to recovery. The brokerage remains optimistic about the medium- to long-term prospects, largely propelled by the increasing adoption of Generative AI (Gen AI), despite acknowledging that short-term volatility may persist.
According to Nuvama, Indian IT services companies have recently delivered largely in-line quarterly results, demonstrating stable revenue growth and margins. Healthy deal wins continued, supported by AI-led demand and ongoing digital transformation initiatives, although conversion timelines have remained extended due to macro uncertainties. Nuvama noted that IT stocks are increasingly reacting to global AI developments rather than solely to their traditional fundamentals.
"We see the current scepticism as a repeat of previous tech cycles (2016–17 being the most recent one), and expect Indian IT companies to rebound, as Gen AI proliferation increases," Nuvama stated, underscoring the potential for a significant expansion of the total addressable market (TAM) to an estimated $300–400 billion by 2030, despite potential near-term revenue cannibalisation from Gen AI-led productivity gains.
For largecap IT firms, Nuvama maintained 'Buy' ratings on TCS, Infosys, Wipro, and Tech Mahindra, setting 12-month target prices at Rs 3,650, Rs 1,650, Rs 255, and Rs 1,750, respectively.