Shares of Indian IT companies, including heavyweights Infosys, Tech Mahindra, TCS and Persistent Systems jumped up to 5% on Monday as multiple tailwinds boosted investor sentiment, pushing the Nifty IT index up around 3% to emerge as the top sectoral gainer.
The index rose to 29,905 in the morning trading hours of Monday, extending sharp gains for the second consecutive session. The index has now jumped nearly 4% over two days.
The sharp surge in IT stocks comes after a significant decline earlier this year, following the launch of plug-ins for AI startup Anthropic's Claude Cowork agent, which could automate tasks across legal, sales, marketing, and data analysis. "We call it the ‘SaaSpocalypse,’ an apocalypse for software-as-a-service stocks," Bloomberg quoted Jeffrey Favuzza from the equity trading desk at Jefferies as saying.
While doomsday prophets continue to debate the future of IT companies following fresh AI advancements, investors were quick to analyse the cheap valuations, leading to some pockets of buying. Nuvama, in its note, had highlighted that the IT sector is setting up for a powerful comeback, not a collapse after the brutal AI-driven selloff.
“We see no existential threat from Gen-AI,” the brokerage writes, arguing that enterprises will still need a “system integrator” to customise plug-and-play AI and software tools for their highly complex, brownfield technology stacks and to take ownership when “the system fails at 2 am.”
The latest round of buying also comes ahead of the Federal Reserve’s policy meeting next month, which would be the first under Chair Kevin Warsh. US President Donald Trump had selected Warsh partly on expectations that he would support lower borrowing costs to stimulate economic growth. However, rising inflation raised questions over the possibility of lowering rates.
Technical view on Nifty IT
The Nifty IT index has witnessed a strong rebound after taking support near its crucial support zone, indicating the possibility of a short-term recovery in the sector, Kunal Kamble, Senior Technical Research Analyst at Bonanza had said. “On the hourly time frame, the index is currently forming an inverse Head and Shoulders pattern. A decisive breakout is seen above the neckline of this pattern and has triggered further upside momentum in the index. Such a move is likely to positively impact heavyweight IT stocks that share a high correlation with the index, including Infosys, Tata Consultancy Services, and HCL Technologies,” he added.
Technically, the analyst had suggested that if the index manages to sustain above the 29,650 mark, it may open the door for a further recovery towards the 31,280 zone in the near term. However, he added that the current price action appears to be a retracement within the broader trend rather than a complete trend reversal. Therefore, traders should approach the sector with a cautious outlook.
“Aggressive or high-risk traders may consider short-term trading opportunities in select IT counters, provided the index maintains strength above key support levels. On the downside, a breach below 28,800 could once again invite selling pressure across the Nifty IT index and associated IT stocks, potentially weakening the ongoing recovery structure,” he said.
IT stocks
Persistent Systems shares were the top gainers on the Nifty IT index, jumping nearly 5%. Infosys shares followed, surging nearly 4%. Mphasis, Tech Mahindra, LTI Mindtree and Coforge shares gained over 3% each.
Tata Consultancy Services (TCS) and OFSS shares jumped around 2% each, while HCL Technologies and Wipro shares gained around 1% each.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
