Indian IT stocks head for strongest weekly gain in 18 years on earnings boost

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Indian IT stocks strong weekly gain

Highlights

The Nifty IT index surges 10.4% so far this week, marking its strongest weekly gain since October 31, 2008, and beating all other sectoral indexes.
Tech Mahindra jumps 8% on Friday after beating revenue estimates, Wipro rises 5.8% on strong quarterly revenue, while Persistent Systems falls 3.3% due to margin pressure concerns.
Despite the rally, the Nifty IT index remains down about 16% year-to-date, underscoring continued investor concern over AI's impact on outsourcing.

Earnings surprise drives sector rebound

As reported by Reuters, the Nifty IT index has risen 10.4% so far this week, putting it on course for its biggest weekly percentage gain since the week ended October 31, 2008, when it climbed 11.24%. The rally is outpacing all other major sectoral indexes as well as the benchmark Nifty 50, which has gained 2.6% over the same period.

Ankur Punj, managing director of Equirus Wealth, said markets are witnessing a sharp rebound, supported by a resurgence in IT stocks following strong quarterly results, even as other Asian markets plunge on a selloff in AI-linked stocks. Tech Mahindra jumps 8% on Friday after its second-quarter revenue beats expectations, helped by robust deal wins, while Wipro rises 5.8% after reporting stronger-than-expected quarterly revenue and signaling that delayed large deals could support growth in the coming quarters.

As of 1:00 p.m. IST, Infosys gains 3.9% and Tata Consultancy Services rises 4.2%, while HCLTech adds 1%. Persistent Systems bucks the broader trend, falling 3.3% after brokerages flag margin pressure from higher amortisation costs.

Sector still faces pressure from AI concerns

The latest gains come as Indian IT services companies continue to navigate investor concerns about artificial intelligence and its potential effect on traditional outsourcing businesses. The week's rally suggests stronger earnings are temporarily outweighing those worries for several of the sector's largest companies.

Even after the rebound, the Nifty IT index remains down about 16% this year, highlighting the pressure the sector is still under before the latest run-up. That leaves the current advance as a notable sentiment shift rather than a full recovery for the industry.

In our earlier coverage of Wipro’s second-quarter revenue beat, we noted signs of steadier client spending in key overseas markets, especially Europe, after a period of muted tech budgets. We also highlighted that AI-linked services were beginning to open up new revenue streams alongside traditional outsourcing work, helping support near-term growth expectations.

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