Nifty IT Today: Indian IT stocks rallied sharply on Monday morning, lifting the Nifty IT index by 1.8% to 37,554.35, as investors priced in a rising probability of a U.S. Federal Reserve rate cut in December. The tech-heavy index remained more than 10% below its peak of 46,088.9, hit in December 2024, but today’s uptick brought renewed optimism to a sector that has been under pressure for several quarters.
Four of the top six gainers on the Nifty were IT firms, signalling a broad-based positive sentiment across the technology pack.
The rally followed a substantial shift in global monetary expectations. According to CME’s FedWatch Tool, the probability of a December Fed rate cut surged to 70%, up from 44% a week earlier. The shift came after New York Fed President John Williams said interest rates could fall “in the near term,” sparking risk-on sentiment across global markets.
Lower U.S. interest rates typically support American economic activity, especially technology spending, which directly influences revenue streams for Indian IT exporters. They also increase the attractiveness of emerging market equities like India for foreign investors, often resulting in stronger overseas inflows.
Indian IT firms derive a large share of their revenue from the U.S. market, making them particularly sensitive to changes in U.S. monetary policy. A Fed rate cut could encourage U.S. corporations to resume or accelerate tech spending, including digital transformation, cloud migrations, application modernisation and AI-linked projects. With demand visibility still cautious across major IT segments, even a marginal improvement in U.S. corporate sentiment can meaningfully shift growth expectations for the sector.
Positive commentary from brokerage Motilal Oswal further bolstered sentiment. Motilal Oswal Financial Services noted that the long-awaited AI services cycle may finally be approaching an inflection point.
The brokerage stated that sector valuations are compelling. It highlighted that the IT index’s weight in the Nifty has fallen to a decade low despite consistently contributing around 15% of index profits. Currently depressed prices, it said, already reflect muted near-term demand and potential productivity deflation from generative AI, leaving room for meaningful upside if enterprise AI deployment accelerates.
Motilal Oswal upgraded its ratings on Infosys, Mphasis and Zensar to ‘buy’, while revising Wipro to ‘neutral’. It also raised its medium-term growth assumptions, expecting a more convincing recovery to appear in 2HFY27, with full momentum in FY28.
IT Stocks Lead the Charge
Tech stocks were among the biggest gainers on Monday. Tech Mahindra surged almost to ₹1,513.80, Infosys rose 2.5% to ₹1,585, HCL Tech climbed 2% to ₹1,640, while TCS and Wipro also added 1% each.
Apart from the largecaps, mid-cap IP stocks were also in the green. Persistent systems gained over 1% whereas L&T Tech, Mphasis, and Coforge also rose over 0.5% each.
What Motilal Oswal said
Motilal Oswal said the compute and infrastructure layer for AI is now largely in place, and incremental spending is likely to shift toward services such as application modernisation, data engineering, workflow integration and large-scale AI deployment. The brokerage explained that improvements in chips and large language models have begun to flatten, mirroring the cloud build-out cycle of 2016–18, when services demand accelerated sharply after infrastructure stabilised.
Early commentary from global peers like EPAM and Globant also signals stabilising deal pipelines and the early emergence of AI-integration work, a trend that could benefit Indian IT players.
Motilal Oswal expects sector revenue growth to gradually improve as enterprises shift spending toward higher-value digital and AI-led transformation. While the next few months may remain soft due to furloughs and budget delays, the brokerage forecasts deal activity to strengthen from mid-2026, translating into revenue expansion in 2HFY27, and sector-wide growth of 8–9% in FY28 as full-scale AI services ramp up.
On valuations, MOSL said the sector remains attractively priced, with the IT index’s weight in the Nifty falling to a decade low despite consistently contributing about 15% of the index’s earnings. According to the brokerage, “current valuations already price in weak demand and margin pressures, leaving meaningful room for rerating as AI-led spending gathers pace.”
Looking ahead, MOSL expects deal momentum to improve gradually through 2026, translating into stronger revenue growth by 2HFY27 and full momentum through FY28, when it expects sector-wide growth to accelerate to 8–9%.
A Sector Poised for Turnaround?
While the near-term environment may remain choppy due to furloughs and delayed budget cycles, Monday’s rally—combined with strengthening global rate-cut expectations—suggests that investors are beginning to position for an eventual recovery.
For now, the Nifty IT index remains far below its peak, but analysts believe the combination of improving U.S. macro conditions, stabilising global tech budgets and an upcoming AI-driven services cycle could lay the groundwork for a multi-quarter turnaround.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
