The Nifty IT index rose for a third straight session on October 15, taking gains to 8.89% since Tuesday, as in-line Q2 earnings, lower valuations and a rotation away from AI-linked stocks drew buyers to traditional IT services.
The Three-Session Rally in Numbers
The Nifty IT index climbed nearly 3% on Thursday, October 15, extending its rally for a third consecutive session. Its cumulative gain since Tuesday reached 8.89%, according to Business Standard. At 10:36 AM, the index was up 2.6%, making it the top sectoral gainer against a 1.29% rise in the Nifty 50.
- Tuesday: the index gained around 5.2%, its strongest single-day rise in over 17 months, led by HCLTech and TCS.
- Thursday morning: eight of the index’s 10 constituents traded higher, with Tech Mahindra and Tata Consultancy Services among the notable gainers.
- Wipro and Tech Mahindra were scheduled to announce quarterly results the same day.
The sector’s move helped a broader rally. Business Standard reported that the Sensex surged about 1,400 points intraday and the Nifty 50 topped 23,000 on Thursday.
Why the Nifty IT Index Is Rising
Analysts quoted by Business Standard pointed to three main drivers. Sunny Agrawal, head of fundamental research at SBI Securities, listed them in order.
The first is a reversal of the AI trade. Agrawal said investors have booked profits sharply across the world, including the US and Korea, because of rising debt at AI-related businesses and higher bond yields. Narendra Solanki of Anand Rathi Share and Stock Brokers described the shift as a rotation into Indian IT as an anti-AI trade, noting that chip stocks such as SK Hynix and Samsung are well below their highs amid worries over stretched valuations and heavy spending.
The second is earnings. Agrawal said Q2 results so far have been largely in line with expectations, with no major negative surprises. The third is valuation. According to Agrawal, most large-cap traditional IT services companies trade at price-to-earnings multiples of 12 to 18 times, with robust cash flows and dividend yields of 3% to 5%.
For readers new to these terms, the price-to-earnings multiple compares a share price with the company’s profit per share, so a lower multiple means investors pay less for each rupee of earnings. Dividend yield is the annual dividend as a percentage of the share price. Together, they explain why analysts describe the sector as value buying after a long correction.
What HCLTech and TCS Reported
Ponmudi R, CEO of Enrich Money, called the recent rally largely an earnings-driven recovery after a prolonged correction. He cited two sets of results:
- HCLTech: profit up 21.2% year on year, with an EBIT margin of 18.2%.
- TCS: profit growth of nearly 15%, with annualised AI revenue of $3.1 billion.
In his view, these numbers suggest AI is gradually becoming a revenue opportunity for Indian IT firms rather than only a disruption risk. This matters because worries about AI replacing IT services work had weighed on the sector.
Global Backdrop: Asia Slides on US Inflation
The rotation story gained force as Asian markets fell on Thursday. Hotter-than-expected US inflation weighed on hopes of interest rate cuts and put fresh pressure on technology and AI-linked stocks, according to a Reuters report carried by Business Standard. South Korea’s Kospi led losses across Asia, with a fall of about 8%, while Japan’s Nikkei dropped 4.8%.
Indian IT stocks moved the other way. That divergence is what analysts mean when they call the rally a rotation rather than a broad technology upswing. The AI-linked names in Korea and the US were being sold, while Indian services companies such as TCS and HCLTech were being bought.
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Relief Rally or Turnaround?
Not every analyst sees a lasting shift. Ponmudi R described the current move as an earnings-led relief rally rather than a confirmed structural turnaround. In his assessment, sustained gains would need stronger US technology spending, consistent deal conversion and an improvement in revenue growth.
On the charts, Vipin Kumar, AVP research at Globe Capital Market, said the Nifty IT index is heading toward neckline resistance near 32,000. He said a decisive close above that level would complete a bullish breakout from an inverted head and shoulders pattern. These are the analysts’ views and not a forecast by Findoc.
The next test is the results from Wipro and Tech Mahindra, and whether the rotation out of AI-linked stocks continues if global markets steady.
