Most IT stocks saw solid gains in morning trade on Tuesday, 13 October, with stocks such as TCS, HCL Tech, Wipro, Tech Mahindra, and Infosys, jumping up to 5%, driving the sectoral index Nifty IT higher by 3%.
Stocks such as Mphasis, LTM, Coforge, Persistent Systems, and Oracle Financial Services Software (OFSS) gained more than 1% each.
Around 9:35 AM, the Nifty IT index was 2.20% up with all components in the green. Equity benchmark Nifty 50 was about 0.60% up at 22,491 at that time.
Why are IT stocks rising today?
A confluence of factors, including better-than-expected Q2 results of TCS and HCL Tech, a slowdown in AI trade, and the dollar’s rise against the rupee, is driving the IT stocks higher.
The dollar index, which measures the greenback’s strength against a basket of six currencies, hovered near its 18-month high of 102.6, boosting Indian IT stocks.
Many Indian IT companies earn a significant portion of their revenue in US dollars. So the dollar’s rise improves their topline.
On the results front, after TCS, HCL Tech also beat Street estimates in Q2FY27. HCL Tech earned $3.72 billion in revenue in Q2FY27, up 2% quarter-on-quarter (QoQ) and 2.2% year-on-year (YoY). According to a Bloomberg poll of 34 analysts, HCL Tech was expected to report $3.68 billion in revenue.
In rupee terms, HCL Tech’s revenue grew 3% QoQ and 11.51% YoY to ₹35,620 crore, while its consolidated profit jumped 21.18% YoY to ₹5,132 crore.
The company’s total deal bookings stood at $3.3 billion, up 27% YoY, taking first-half bookings to a record high.
HCLTech raised its FY27 revenue growth guidance to 2.5–4% in constant currency (CC) terms, from the earlier range of 1–4%.
To recall, TCS’s Q2FY27 net profit rose 15% to ₹13,884 crore ($1.4 billion). Bloomberg analysts expected TCS’s revenue to be ₹13,786 crore. Revenue climbed 11% to ₹73,188 crore.
Another factor behind the rise in IT stocks is a decline in AI trade, which is reflected in the crash in the Kospi and the Taiwan Weighted Index. Kospi crashed more than 6% in Tuesday’s session while Taiwan’s index dropped 2% amid concerns over stretched valuation. Moreover, industry leaders and policymakers are calling for stricter safety rules and regulations for AI, raising concerns that the sector’s rapid growth could slow in the near future.
“Dollar’s rise, better-than-expected Q2 results of industry leaders like TCS and HCL Tech, and some unwinding of AI trade are lifting the Indian IT stock,” Ajit Mishra, SVP – Research, Religare Broking, noted.
Should investors buy?
Experts say long-term investors can remain invested and may consider some stocks on dips. However, the sectors remain to be avoided for the short term.
“Long-term investors who already hold these stocks may consider accumulating them gradually. However, short- and medium-term investors should stay on the sidelines until geopolitical uncertainties ease and there is greater clarity on how AI will reshape the industry,” said Mishra.
Sumit Pokharna, SVP- Fundamental Research at Kotak Neo, underscored that the IT sector’s valuations have corrected significantly, and many concerns related to AI and revenue growth appear to be priced in, making valuations attractive at this point. However, investors need to be stock-specific as challenges galore.
Pokharna suggests investors can consider stock-specific bets, but the sector as a whole is not a clear buy at this stage. He has buy recommendations on Coforge and Persistent Systems from the sector.
Read all market-related news here
Read more stories by Nishant Kumar
Disclaimer: This article is for educational purposes only and does not constitute investment advice. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
