Indian IT stocks rallied sharply in early trade on Tuesday, outperforming the broader market as improving earnings sentiment, a favourable global technology backdrop and renewed brokerage optimism sparked broad-based buying across the sector.
The Nifty IT index was up around 3.1% in intraday trade, with Coforge leading the gains, rising 6.65%.
Mphasis climbed 4.34%, while Persistent Systems, Tech Mahindra and Tata Consultancy Services (TCS) gained about 3% each. Infosys advanced 2.63%, with gains also seen in Oracle Financial Services Software, HCL Technologies and Wipro.
Five key factors appear to be driving the rally:
1. Global AI trade rotation
While AI hardware names such as Nvidia, AMD and Micron came under pressure, software-focused Indian IT ADRs outperformed, signalling a rotation from semiconductor stocks towards IT services companies expected to benefit from enterprise AI spending.
2. Jefferies upgrades the sector
Adding to the positive mood, Jefferies upgraded the Indian IT sector to 'Neutral' from a more cautious stance and added Infosys to its model portfolio. The brokerage cited improving demand indicators, more attractive valuations following the sector's correction.
ALSO READ: Infosys Rallies 3% As Jefferies Adds Stock To Model Portfolio, Turns Neutral On IT
3. Earnings season offers reassurance
The Q1 earnings season has largely met investor expectations. While growth has remained moderate, companies have broadly delivered in line with estimates, easing concerns over a sharper slowdown in discretionary technology spending. Investors are now increasingly looking toward a stronger Q2.
4. Coforge delivers a confidence boost
Coforge emerged as the biggest gainer after reporting robust revenue growth and reiterating its expansion strategy. The company also announced an interim dividend, approved plans to set up an entity in China and maintained an optimistic outlook.
5. Long-term growth drivers remain intact
Beyond quarterly earnings, investors continue to bet on structural tailwinds for the sector. Analysts point to healthy large-deal pipelines, accelerating enterprise AI adoption, stabilising client technology budgets and relatively inexpensive valuations after months of underperformance.
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