IT stocks today: The Nifty IT index surged as much as 3.3% to 33,138.6 on Friday, October 23, as buying interest returned to information technology stocks amid a strong recovery in the sector following encouraging September-quarter earnings. In contrast, benchmark indices remained largely unchanged, rising just 0.05% each.
The IT index has staged a sharp comeback after months of pressure, gaining 17% in October alone following an 11% decline in September. It has advanced 15% over the past month, 14% in three months and 8% in six months. Despite the recovery, the index remains down 10% over the past year. It has, however, recovered around 29% from its July low of 25,699.10 .
Tata Consultancy Services (TCS) led Friday’s gains, rising around 3%, while Infosys, HCL Technologies and Wipro advanced approximately 2% each. Among mid-cap IT stocks, Coforge, Persistent Systems and Mphasis gained nearly 1% apiece. Tech Mahindra, L&T Technology Services and Mastek (MTL) bucked the broader trend and traded in the red.
The rally comes after a global selloff in software stocks earlier this year, when concerns mounted that artificial intelligence could disrupt traditional IT services business models. Slowing revenue growth, geopolitical uncertainty and increasing pressure from clients seeking lower prices had also weighed on investor sentiment.
Why are IT stocks rising?
The September-quarter earnings season has helped restore confidence in the sector’s near-term growth prospects. Better-than-expected performances from several major IT companies have eased concerns about demand weakness and the potential disruption from AI.
Tech Mahindra reported second-quarter revenue above expectations, supported by strong deal wins, while Wipro delivered stronger-than-expected revenue, with delayed large deals potentially supporting growth in the coming quarters. HCLTech benefited from stronger AI-related revenue and healthy deal wins, while TCS also reported a healthy set of quarterly results.
Infosys, one of the sector’s key bellwethers, is scheduled to announce its September-quarter results on October 23. The company is expected to report revenue growth of around 1.8%, making its results and management commentary important indicators of demand conditions across the sector.
However, the recovery remains vulnerable to external headwinds, including elevated crude oil prices, high US bond yields and continued foreign investor outflows. Within IT, uncertainty over AI-led changes in client spending, revenue growth prospects and the sustainability of valuation multiples continues to make stock selection important.
IT sector outlook – Top stocks to buy
The outlook for IT stocks remains bullish, with brokerages favouring select companies that could benefit from large-deal ramp-ups and improving growth in the second half of FY27.
Deven Choksey Research remains positive on Persistent Systems, Tech Mahindra and Tata Elxsi, while maintaining a cautious stance on Wipro and Infosys. The brokerage expects the second half of FY27 to improve as large deals signed earlier begin contributing more meaningfully to revenue.
According to the research firm’s outlook, Persistent Systems, Tata Technologies, Tech Mahindra and TCS are positioned to benefit from deal ramp-ups. Companies with greater exposure to European automotive clients and US healthcare could face relatively weaker growth, with Wipro and Infosys’ manufacturing vertical particularly vulnerable. Tier-1 IT companies’ EBIT margins are expected to remain broadly stable at 20.3%, while mid-cap companies could benefit from the reversal of cost pressures experienced in the first quarter.
For investors, Persistent Systems, Tech Mahindra and Tata Elxsi remain among Deven Choksey Research’s preferred stocks, while Wipro and Infosys warrant greater caution.
Meanwhile, Jefferies believes Indian IT stocks could see a valuation re-rating as earnings resilience challenges pessimistic assumptions about long-term growth. In its October 21 note, the brokerage said the sector’s correction had already incorporated lower growth expectations, creating room for a recovery if companies avoid further disappointments.
“With IT firms still delivering growth despite weak macro and AI deflation, investors are more willing to revisit their terminal growth assumptions,” Jefferies said.
The brokerage cautioned that a sustained recovery would depend on companies delivering earnings and meeting FY27 and FY28 growth expectations. A deterioration in global AI capital expenditure sentiment or further earnings disappointments could undermine the prospect of higher valuation multiples.
Jefferies retained its ‘Hold’ rating on Infosys but raised its target price to ₹1,160 from ₹1,020. For TCS, it maintained its ‘Underperform’ rating while increasing the target price to ₹2,125 from ₹1,800. The brokerage raised target prices across large-cap IT companies by 14-18%, while continuing to favour selective stock picking over a broad-based sector recovery.
The sustainability of the IT rally will depend on whether improving deal conversions translate into stronger revenue growth and earnings in the coming quarters.
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.
