Indian IT sector heavyweights, including Tata Consultancy Services (TCS), Infosys, and Tech Mahindra, spearheaded significant gains on the Sensex and Nifty indices on Thursday. This rally was largely attributed to a developing "reverse AI trade" strategy among investors, prompted by surprising inflation data from the United States.
The shift in market sentiment occurred after US Core CPI inflation for September accelerated to 0.33% month-on-month, surpassing August's 0.29%. This unexpected rise has cast doubts on the ambitious AI-related investment commitments by major technology firms globally, simultaneously increasing expectations for further interest rate hikes by the US Federal Reserve.
Key Performers and Market Impact
Among the top Sensex gainers, Tech Mahindra Ltd. saw its shares jump 2.41% to Rs 1,614. TCS followed with a 2.24% increase, while Infosys Ltd. recorded an 1.85% rise. The broader market reflected this buoyancy, with the BSE Sensex climbing 467 points (0.65%) to close at 73,249.70, and the NSE Nifty gaining 123 points (0.54%) to reach 22,745.70.
Nomura analysts highlighted that components with substantial exposure to semiconductors, such as computers and possibly toys, experienced increases in September. This suggests that the ongoing buildout of artificial intelligence infrastructure is contributing to inflationary pressures.
Expert Insights on Market Resilience
V K Vijayakumar, Chief Investment Strategist at Geojit Investments, commented that the correction observed in AI stocks globally presents a positive outlook for the Indian market. He suggested that Foreign Institutional Investors (FIIs), who had previously been divesting from Indian equities to invest in AI stocks, might now halt or even reverse this trend.
Furthermore, Vijayakumar noted that potential reconsideration of Long Term Capital Gains (LTCG) taxation in the upcoming budget, coupled with strong Q2 results anticipated from financial sector companies and optimism surrounding recent HCL Technologies results, could collectively bolster the resilience of the Indian market and specifically the IT index.