Nifty IT rebounds 4% as Infosys, TCS and Coforge jump

IT stocks snap a prolonged selloff

Major Indian IT stocks staged a sharp rebound, with investors returning to technology counters after weeks of selling linked to AI disruption fears and slowing global demand concerns. The Nifty IT index jumped nearly 4% in the session highlighted in the copy, with gains led by Coforge, Mphasis, Persistent Systems, Tech Mahindra, Infosys and Tata Consultancy Services (TCS). Market participants attributed the move to improving risk appetite, bargain hunting and short covering after the sector remained under pressure for months. Some analysts also flagged that the correction had compressed valuations across the IT sector, creating what they described as long-term buying opportunities.

What moved the Nifty IT index

The rally was broad-based across several large and midcap IT names. Coforge surged almost 6% in the session described, while Mphasis, Persistent Systems and Tech Mahindra gained between 4% and 5%. Heavyweights Infosys and TCS also climbed sharply and helped the IT pack outperform benchmark indices. In another market update included in the copy, Infosys, Oracle Financial Services Software (OFSS), Tech Mahindra and other IT stocks gained up to 3% even amid weak broader market sentiment.

AI disruption concerns that triggered the correction

The earlier selloff was linked to fears that rapid advances in artificial intelligence could disrupt the traditional IT outsourcing model. The pressure intensified after a series of AI-related developments, alongside weak management commentary from several frontline IT firms. The copy also notes that concerns escalated after OpenAI launched its “OpenAI Deployment Company” earlier this month, which revived worries that AI-led automation could reduce demand for conventional software services and coding-related work performed by IT vendors.

Uncertainty around the US economy and slower discretionary spending by global clients added to the downtrend. This matters for Indian IT because companies derive a large share of revenues from North America, making the sector sensitive to US growth trends, enterprise technology spending and interest-rate expectations.

Macro cues: yields, rupee and risk appetite

Traders linked the rebound to short covering and bargain hunting after the Nifty IT index emerged as one of the weaker-performing sectoral indices this year. The move also coincided with softer US Treasury yields and improving sentiment around a less aggressive interest-rate environment in the US, easing some pressure on export-oriented technology stocks.

A weaker rupee was cited as another support for sentiment toward export-oriented IT firms that earn a substantial share of revenues in dollars. Separately, the copy also references improved market sentiment on hopes of fresh Iran-US talks and, in another intraday context, broader index support from hopes that President Donald Trump could consider tariff relief for Canada and Mexico.

Midcaps take the lead as buyers turn selective

Midcap technology firms saw particularly strong buying interest. Persistent Systems, Coforge and Mphasis were repeatedly cited as key gainers, with the copy describing them as better positioned in digital transformation and AI-led services. It also notes that mid-tier IT services firms have been outperforming larger rivals in revenue growth, driven by focused approaches in areas such as cloud engineering and AI.

The copy attributes part of this outperformance to leaner structures and domain expertise, with references to flexible pricing and outcome-based models to win client work.

Brokerage view: CLSA reiterates bullish stance

Global brokerage CLSA reiterated a bullish stance on Indian IT stocks in the material provided, describing valuations as closer to 10-year averages after the recent correction. The copy states the Nifty IT index fell nearly 9.5% over the past month in that period.

CLSA reiterated its Outperform view on key names, with Persistent Systems and Coforge described as top ‘High Conviction Outperform’ picks. The brokerage set target prices of ₹8,058 for Persistent and ₹2,278 for Coforge, implying upside potential from current levels.

From a sector perspective, CLSA said BFSI continues to anchor revenue visibility for large caps like TCS and Infosys, while weakness persists in retail, auto and healthcare verticals. It also noted that AI-led pricing pressure appears to be easing, with discussions showing no evidence of pricing deflation in renewal contracts, and that deal pipelines remain strong.

Q3 FY25 earnings: Persistent and Coforge in focus

Earnings references in the provided copy reinforced why midcaps drew attention. Persistent Systems reported year-on-year net profit growth of 30.4% to ₹3,730 million (₹373 crore) for the quarter ended December 31, 2024, while consolidated revenue rose 22.6% year-on-year to ₹30,622.8 million (₹3,062.28 crore). Operating margin improved by 90 basis points to 14.9%, and the company declared an interim dividend of ₹20 per share.

The copy also reports Persistent’s order booking at $194.1 million in Total Contract Value (TCV) and $128.3 million in Annual Contract Value (ACV). Another earnings snapshot states revenue in US dollar terms rose 5% quarter-on-quarter to $160.2 million.

For Coforge, one section states net profit rose 10.3% year-on-year to ₹2,680 million (₹268 crore), backed by a 42.8% year-on-year revenue surge. Another section in the provided text separately states net profit at ₹26,800 million (₹2,680 crore) versus ₹24,280 million (₹2,428 crore) a year earlier. The copy also mentions Coforge announced an acquisition of US-based Xceltrait Inc. for $17.85 million, and separately references $101 million in new deals.

Key figures at a glance

Market impact: what the rebound changes and what it does not

The rebound shows investors are willing to return to select IT names after a steep correction, especially where there is perceived visibility in digital, cloud and AI-led services. For large caps, the copy points to BFSI as a stabilising vertical, while flagging continued weakness in retail, auto and healthcare. The shift in sentiment also highlights how macro inputs like US yields and currency moves can quickly affect export-heavy sectors.

The copy also notes geopolitical risk assessment from CLSA, which said direct exposure to the Middle East remains in low single digits for most Indian IT firms, limiting immediate earnings risk, though prolonged tensions could indirectly impact global tech spending cycles.

Why this matters for investors tracking Indian IT

The sequence captured in the copy links three threads: fears of AI disruption, macro-driven risk appetite, and a valuation reset that drew bargain buying. Short covering amplified the upmove once the sector showed signs of stabilising. The emphasis on midcaps such as Coforge and Persistent reflects the market’s preference for firms showing stronger growth momentum and earnings visibility in the current cycle.

For now, the rally suggests a partial reset in sentiment rather than a definitive end to volatility, given the same factors remain central: US enterprise spending, interest-rate expectations, and whether AI adoption changes pricing and demand patterns.

Conclusion

Indian IT stocks rebounded sharply as the Nifty IT index rose nearly 4%, driven by short covering, softer US yields, currency support and selective buying after valuation compression. Midcaps led the move, while broker commentary highlighted easing concerns around AI-led pricing pressure and steady deal pipelines. Investors will continue tracking management commentary, US demand signals, and further brokerage updates as earnings season progresses.