Shares of major Indian IT companies experienced a significant rebound on Friday, with the Nifty IT sub-index climbing more than 2 percent. Leading the charge were Tata Consultancy Services (TCS), Infosys Ltd, and Wipro Ltd, whose shares jumped up to 4 percent. All constituents within the Nifty IT index traded in positive territory during the session, indicating broad-based optimism.
IT Sector Rebounds Amidst Market Shifts
The rally comes despite ongoing concerns regarding the US suspension of PERM applications and mixed quarterly results reported by TCS. However, market analysts point to several factors contributing to the sector's resurgence.
Analysts Weigh In: AI Valuations and PERM Concerns
Ravi Singh, Chief Research Officer at Master Capital Services, noted that the rebound in Indian IT stocks was partly fueled by a recent sell-off in global AI-related stocks. Reports indicating that OpenAI's annualized revenue was below initial projections (around $50 billion vs. $70 billion) prompted investors to reassess AI valuations. This reassessment may have alleviated some immediate concerns about AI's disruptive pace on traditional IT services, thereby encouraging buying interest in Indian firms.
Furthermore, Singh highlighted that TCS's robust 15 percent year-on-year growth in net profit and an 11.2 percent increase in revenue bolstered investor sentiment. Comments from Nasscom and TCS's relatively low dependence on the PERM route also helped ease worries stemming from recent US policy changes.
Despite the positive momentum, Singh cautioned that the sustainability of this recovery would hinge on clearer earnings visibility, consistent deal conversions, and greater clarity regarding AI-driven demand in the future.
Kranthi Bathini, an Equity Strategist at WealthMills Securities, advised investors with a short-term outlook to hold their IT stock positions. For those with a longer investment horizon, Bathini views the IT sector as a contrarian opportunity, recommending a 'buy-on-dips' strategy.