Indian IT stocks buck global tech slump, climb on earnings beat and AI optimism

Mumbai: Indian information technology stocks rallied Tuesday after pressure on AI companies and chipmakers globally, as well as better-than-expected first quarter results improved the street's sentiment on the most underperforming sector this year.The Nifty IT index was up 3.3% on Tuesday, led by Coforge's 10.2% gains.

Others like Tata Consultancy Services, MphasiS, Tech Mahindra and Persistent Systems advanced between 3.2% and 4.5%.

The benchmark Nifty 50 ended flat at 23,985.35.South Korea's Kospi, consisting heavily of chipmakers, declined nearly 11% in Tuesday's trade, whereas Taiwan fell 4.7%.

The Kospi is now down 28% in the past month, while Taiex has declined 7.6%.The Nasdaq also continued to fall for the fourth straight day.Read more: HUL upside maybe limited as margins face cost pressure"The buoyancy in India's IT services stocks is on the back of globally overheated AI trade unwinding as well as better than feared earnings print and management guidance," said Sham Chandak, head of institutional equities at Elios Financial Services.Sagar Shetty, research analyst at StoxBox said the recent correction in global AI and chipmaking stocks, coupled with concerns over elevated AI capex, rising leverage and the sustainability of returns, has prompted investors to reassess the outlook for Indian IT services.

132696944'Above Par'"After a prolonged period of pessimism surrounding AI-led disruption and weak discretionary spending, Q1FY27 earnings exceeded subdued expectations," he said.On Tuesday, Coforge reported that its consolidated revenue from operations advanced 49%, and profits increased by 86% compared to the same period last year.The Nifty IT index is already up 11.3% in the past month, compared to the Nifty's fall of 0.3%.However, IT is down over 20% this year, while the Nifty has declined 8.3% in 2026.Some analysts believe IT is more of a domestic story, than a global one.

Harsh Thakkar, research analyst at Samco Securities said the rally in Indian IT stocks is being driven by a combination of factors rather than a single trigger."Strong quarterly earnings from companies such as Coforge have reinforced confidence that demand remains resilient, while attractive valuations after the correction have encouraged investors to re-enter the sector," he said."Although global AI and semiconductor stocks have witnessed some profit booking, this has not, in our view, materially altered the long-term outlook for Indian IT services, which continues to be supported by digital transformation, cloud adoption, and enterprise technology spending."IT OutlookShetty said, management commentary across the sector pointed to improving demand visibility, healthy large deal momentum and a gradual recovery in client spending, supporting expectations of a stronger second half of FY27.“Although IT stocks have already rallied over the past month, we still see a favourable risk-reward and believe investors can increase allocation at current levels,” he said, adding that he prefers HCL Technologies, Coforge and Persistent Systems.

Chandak said that despite the fast changing dynamics, the market now sees IT stocks as a lucrative value buying opportunity.

“IT is probably the only major sector that has valuation comfort, and the sector is now 35% below its 5year median valuation,” he said.

Thakkar of Samco said the sector was already undervalued, and recent earnings have validated that fundamentals remain intact.

“We recommended gradual accumulation over the past month, and continue to maintain that stance,” he said.

“Investors should focus on staggered buying rather than chasing short-term momentum, with a preference for quality midcap IT companies.” ...