The Nifty IT index staged a strong comeback on July 2, climbing more than 3 per cent after witnessing four consecutive sessions of losses. The rally was driven by renewed buying in large-cap technology stocks, making the IT index the best-performing sector on the NSE.
Frontline IT companies led the gains as investors returned to the sector following the recent correction.
Infosys surged 5.09 per cent to Rs 1,035.40, emerging as the top gainer on the Nifty 50. HCLTech rose 4.08 per cent to Rs 1,076.40, while Tata Consultancy Services (TCS) advanced 3.17 per cent to Rs 3,476.40. Tech Mahindra gained 2.55 per cent to Rs 1,397.00 and Wipro climbed 2.30 per cent to Rs 174.04.
Five IT companies featured among the top 10 gainers on the Nifty 50, signalling a broad recovery in investor sentiment after sustained selling pressure over the previous four trading sessions.
The buying interest was not limited to large-cap stocks. Mid-cap IT companies also participated in the rally, indicating broad-based strength across the sector.
Coforge jumped 4.83 per cent, while Mphasis, Tata Technologies, Tata Elxsi and Persistent Systems gained between 2 per cent and 5 per cent, making IT one of the strongest-performing segments in the broader market.
The recovery comes after IT stocks had faced pressure amid concerns over slowing discretionary technology spending, uncertainty surrounding global economic growth and questions over how artificial intelligence could alter the business models of traditional IT service providers. The sector, which derives a significant share of its revenue from the US and Europe, also remains sensitive to changes in corporate technology budgets and global macroeconomic conditions.
Despite these concerns, the latest quarterly performance of several IT companies has remained relatively stable, with deal wins and revenue growth holding up better than many investors had feared.
Should Investors Buy IT Stocks At Current Valuation?
According to Shashank Udupa, a Sebi-registered research analyst and Founder of Vayu Capital, the recent correction in IT stocks has been driven more by concerns over future valuations than by any deterioration in business fundamentals.
"IT companies have reported decent results so the fall in the stock prices is not because of any de-growth. If you look at companies like Infosys, Oracle, and Persistent, the underlying business performance remains fairly resilient," he said.
However, he noted that the market's biggest concern today is how AI could reshape the industry and whether traditional IT service providers can maintain their growth and pricing power in this new environment.
"This creates an interesting situation where IT stocks could either turn out to be a value opportunity or a value trap. While many of these companies may do well over the long term, the market may continue to assign lower valuations until there is greater clarity on the AI transition," Udupa said.
For investors with a long investment horizon, he believes the current weakness presents an opportunity, provided they are prepared for volatility.
"For individual investors this is a good opportunity. If they are willing to be patient and can tolerate short-term underperformance, exposure to quality IT companies could prove rewarding over the long run," he said.
At the same time, he cautioned against taking a blanket approach to the sector, saying investors should remain selective as the performance gap within the industry is likely to widen.
"Rather than taking a broad sector view, investors should focus on companies with strong client relationships, healthy deal wins, and the ability to navigate technology shifts. For long-term investors, periods of muted sentiment have often been the best time to build exposure to quality IT businesses," Udupa added.
