The Nifty IT index has risen for a third consecutive session as steadier earnings, cheaper valuations and waning enthusiasm for expensive AI-linked shares draw investors back to traditional software exporters.
India’s Nifty IT index extended its rebound on Thursday, rising for a third straight session as investors piled back into software exporters after a difficult stretch for the sector. The move came after a strong run earlier in the week and reflected a mix of steadier second-quarter earnings, cheaper valuations and a growing view that money may be rotating out of heavily owned artificial intelligence-linked technology names and into traditional services stocks. Market data showed eight of the index’s 10 constituents trading higher, with Tech Mahindra and Tata Consultancy Services among the notable gainers.
The latest advance followed a sharp recovery on Tuesday, when the benchmark posted one of its strongest single-day gains in more than 17 months. According to market commentary cited by Business Standard, the sector’s recent strength has been helped by results that have generally come in close to expectations, limiting the kind of negative surprises that often pressure earnings-season trade. Analysts also point to a prolonged correction that left many Indian IT shares looking inexpensive relative to their own history.
Sunny Agrawal, head of fundamental research at SBI Securities, said the move has been driven in part by a reversal in enthusiasm for the AI trade, as higher bond yields and rising debt loads among some AI-related businesses prompted global profit-taking. He added that the sector is also benefiting from earnings that are broadly holding up and from valuation support, with many large Indian IT companies trading on price-to-earnings multiples of about 12 to 18 times while offering solid cash generation and dividend yields. Narendra Solanki of Anand Rathi Share and Stock Brokers said investors are increasingly treating Indian IT as an “anti-AI” trade as enthusiasm cools for expensive chip and infrastructure names.
The broader backdrop has helped explain why the sector’s rally has gathered pace. Moneycontrol reported that the Nifty IT index posted its biggest monthly gain in six years in July, rising nearly 19 per cent as investors rotated towards lower-valued services companies. That rebound was broad-based, with large-cap names including HCLTech, Tech Mahindra, Infosys, TCS and Wipro taking part. Even so, some analysts remain cautious. Ponmudi R, chief executive of Enrich Money, described the latest move as an earnings-led relief rally rather than proof of a lasting turnaround, saying sustained gains would depend on firmer US technology spending, better deal conversion and improved revenue growth.
Attention is now turning to whether the sector can build on the momentum. Wipro and Tech Mahindra were due to report quarterly numbers on Thursday, giving investors another read on demand trends, margins and management commentary. Vipin Kumar, AVP research at Globe Capital Market, said the Nifty IT index is approaching resistance near the 32,000 level and that a decisive close above that mark could confirm a bullish breakout pattern. For now, the sector’s recovery appears to rest on a delicate balance: improving results and attractive valuations on one side, and lingering concerns about global tech spending and the durability of AI-related growth on the other.
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