- Indian IT stocks rallied on Tuesday, with TCS, Infosys, HCL Tech, Wipro, Coforge, and Tech Mahindra gaining up to 10%.
- Coforge surged 10% following a strong Q1 performance, while Mphasis gained over 4.5%.
- Nifty IT index surged 2.7%, making it the best sector on Dalal Street.
- The biggest trigger behind Tuesday's rally is the sharp selloff in AI and semiconductor stocks across Asia.
- Shares of memory-chip giants Samsung Electronics and SK Hynix slumped as much as 13%-14%, while Japanese flash memory maker Kioxia Holdings dropped nearly 18%.
- Indian IT companies are less vulnerable because they do not have pure-play AI businesses whose earnings depend on continued heavy spending on AI chips, data centres and high-bandwidth memory.
- The sector also received support from the continued weakness in crude oil prices and improving sentiment in Indian equities.
- Jefferies believes a reversal in the AI trade could drive tactical upside, particularly after the sector's sharp decline.
Coforge and Mphasis led the Indian IT stock rally on Tuesday, with shares of major players like TCS, Infosys, and HCLTech rising up to 10%. The Nifty IT index surged 2.7%, marking it as the best-performing sector on Dalal Street.
The rally was primarily triggered by a sharp sell-off in AI and semiconductor stocks across Asia, with memory-chip giants like Samsung Electronics and SK Hynix experiencing declines of 13%-14%, and Kioxia Holdings dropping nearly 18%. Despite this global downturn, Indian IT companies are considered less vulnerable due to their lack of pure-play AI businesses reliant on heavy spending on AI chips and data centers.6
The sector also benefited from a decline in crude oil prices and a general improvement in sentiment within Indian equities. Jefferies analysts noted that a reversal in the AI trade could provide tactical upside for the sector, which has seen a 25% year-to-date decline, with major firms down 35-50% from their peaks over the past two years.
Midcap stocks outperformed, with Coforge surging 10% following a strong Q1 performance, while Infosys gained 4.4% to reach ₹2,397 on the BSE. Investors are closely monitoring the Federal Reserve's stance on interest rates and its implications for inflation and economic growth amid ongoing geopolitical tensions.
“The Nifty IT index surged 2.7%, making it the best-performing sector on Dalal Street amid a broader sell-off in AI-linked stocks. Analysts at Jefferies suggest that a reversal in the AI trade could drive tactical upside for Indian IT companies, which are less vulnerable to the current market dynamics.”
