As the Indian stock market traded higher with most sectoral indices in the green, it was the IT pack that hogged the limelight in intraday trade on Thursday, 2 July.
The Nifty IT index surged over 4% in intraday deals, with stocks like Infosys, Coforge, Mphasis, HCL Tech, Persistent Systems, and TCS jumping up to 5% during the session.
The IT index was 4% up at 26,781 around 10:10 am, looking set to snap its four-session losing streak. Benchmark Nifty 50 was about 0.40% up at 24,096 at that time.
Notably, Nifty IT was the top sectoral loser in the first half of calendar year 2026 (H1CY26) as it crashed 30% during the period, compared to a 9% decline in the Nifty 50, largely due to global macroeconomic concerns, weak discretionary spending by clients, earnings growth-valuation mismatch, and artificial intelligence (AI)-led disruption.
Over the last one year, the IT index has lost 29% with stocks crashing up to 40%. The index hit an over three-year low of 25,699 on 1 July 2026.
Time to buy IT stocks?
A sharp decline in IT stocks for over a year now has raised speculations about the emergence of value in the sector. Some analysts, as per media reports, have started suggesting taking contra bets on the sector.
However, still a majority of experts appear cautious about the sector, as the impact of AI on the sector is still difficult to clearly assess. Some experts suggest staying away from the sector.
“I don’t see value in the sector at this juncture. What we’re seeing today is more of a technical bounce that happens from time to time. I doubt the rally can sustain unless we hear encouraging commentary from management during the upcoming earnings season,” said Ajit Mishra, SVP of Research at Religare Broking.
The earnings season will start in the coming days, in which the focus will be on management guidance, particularly after the recent developments.
Investors will closely watch enterprise spending trends and how much revenue companies are generating from AI-related projects. Those factors will indicate whether the sector has bottomed out or if there’s still more downside.
According to brokerage firm Motilal Oswal Financial Services, despite valuations having corrected meaningfully, a sustained rerating is possible only after evidence that demand is improving, revenue growth is stabilising, and companies can show that AI-led opportunities have started to offset productivity-related headwinds.
“We expect demand commentary to stay soft in Q1FY27, as macro, AI and geopolitical overhangs continue to weigh on discretionary spending and decision-making cycles. We build in tepid quarter-on-quarter growth across our coverage universe for Q1FY27, with the soft start likely extending into Q2FY27 as well,” said Motilal Oswal.
The chatter around anti-AI trade also appears premature.
Mishra pointed out that some companies are simply riding the AI wave by adding AI to their branding or highlighting limited AI initiatives. Those companies are unlikely to benefit in the long run.
“We have heard several companies position themselves as AI leaders or claim they are moving in the right direction. However, it’s still too early to draw conclusions. One or two quarters of performance are not enough, especially when companies are transitioning from a fundamentally different business model,” said Mishra.
For now, it appears that investors are not losing much by staying on the sidelines.
“Closely monitor management guidance. If management starts saying that the phase of 1-2% growth is behind them and they are confident of delivering stronger growth going forward, that could be the right time to invest,” said Mishra.
Rishabh Nahar, Partner and Fund Manager at Qode Advisors, told Mint that IT is a “show me” sector at this juncture. One can consider selective, bottom-up bets in well-capitalised, diversified players, but it is not a sector-wide call.
“The core worry is structural: agentic AI tools are seen eating into application development, testing and maintenance work, which is a meaningful chunk of industry revenue, with some estimates of a 10-12% revenue hit over the next 3-4 years. But near-term earnings are still likely to disappoint for a few more quarters,” Nahar said.
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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.
