Infosys, TCS, Tech Mahindra shares jump: Why IT stocks gained up to 6% today

Major information technology (IT) stocks staged a sharp rebound on Tuesday, with investors returning to battered technology counters after weeks of relentless selling triggered by artificial intelligence disruption fears and slowing global demand concerns.

The Nifty IT index jumped nearly 4%, led by strong gains in Coforge, Mphasis, Persistent Systems, Tech Mahindra, Infosys and Tata Consultancy Services (TCS).

Coforge surged almost 6%, while Mphasis, Persistent Systems and Tech Mahindra gained between 4-5%. Heavyweights Infosys and TCS also climbed sharply, helping the broader IT pack outperform the benchmark indices.

The rebound comes after a brutal correction in Indian technology stocks earlier this year.

The selloff had intensified after a series of artificial intelligence-related developments triggered fears that automation could eventually disrupt large parts of the traditional IT outsourcing business model.

Concerns escalated further after OpenAI launched its “OpenAI Deployment Company” earlier this month, reviving worries that AI-led automation could reduce demand for conventional software services and coding-related work performed by IT vendors.

Weak management commentary from several frontline IT firms, slowing discretionary spending by global clients and uncertainty around the US economy had added to the pressure.

It may be noted that IT companies derive a large share of their revenues from North America, making the sector particularly sensitive to US growth trends, enterprise technology spending and interest-rate expectations.

But after the steep correction, investors appear to be selectively returning to quality technology names, especially companies with strong digital, cloud and AI-related capabilities.

Market participants also pointed to short covering and bargain hunting after the Nifty IT index emerged as one of the worst-performing sectoral indices this year.

Traders said the rally gathered momentum as investors rushed to cover short positions in heavily sold IT counters after the sector showed signs of stabilising over the past few sessions.

The rebound also coincided with softer US Treasury yields and improving sentiment around the possibility of a less aggressive interest-rate environment in the United States, easing some pressure on export-oriented technology stocks.

Analysts said a weaker rupee also supported sentiment toward export-oriented IT firms, which earn a substantial share of revenues in dollars.

Midcap technology firms saw particularly strong buying interest during the session.

Persistent Systems, Coforge and Mphasis — companies seen as relatively better positioned in digital transformation and AI-led services — emerged among the biggest gainers.

Some analysts believe the current correction may also be creating long-term buying opportunities after valuations across the IT sector compressed sharply over the past few months.

Still, market participants cautioned that volatility in technology stocks is unlikely to disappear anytime soon.

Much will depend on whether global clients revive discretionary spending, how quickly IT companies adapt to AI-led disruption and whether the US economy avoids a sharper slowdown in the months ahead.

For now, though, Tuesday’s rally suggests investors may once again be willing to bet on India’s battered IT sector after months of heavy selling.

(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)

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