TCS shares surged 28% in October, hitting an over 7-month high of ₹2,624.75 on Friday's intraday trading, representing a 33% bounce back from its 52-week low of ₹1,976 hit on July 1, 2026. The stock has outperformed the market significantly, soaring 28% in the past month compared to a 2.8% decline in the BSE Sensex. However, NIFTY IT index was trading marginally lower at 32,027, down 54 points or 0.17% by midday on Friday, with seven of ten constituents in the red despite a strong one-month recovery of over 13%. As per The Hindu BusinessLine, the IT gauge had swung between 31,144 and 33,138 intraday, reflecting volatile sentiment ahead of the quarterly results season. TCS led the pack with a gain of 1.16% to ₹2,536, while Infosys added 0.21% to ₹1,155 and HCL Tech was nearly flat. On the losing side, OFSS fell 2.40% and LTM shed 2.32%, while Tech Mahindra dropped 1.38%. Advancers numbered just three against seven decliners, highlighting the mixed sentiment across the sector.
Indian IT stocks experienced a notable market value recovery of approximately ₹3.87 lakh crore in October, with the Nifty IT index rising about 16% after a previous decline of roughly 20% during the first two months of 2026. The combined market capitalisation of Nifty IT stocks increased from about ₹22.01 lakh crore to ₹25.88 lakh crore, representing a significant turnaround from the sector's recent weakness. Foreign investors have returned with ₹6,463 crore of sector buying in the September quarter, according to The Economic Times, with NSDL data showing foreign portfolio investors bought ₹6,463 crore of IT stocks during the third quarter. The rally has been broad across the large-cap technology universe, with TCS shares jumping 22%, Tech Mahindra gaining 20%, Mphasis advancing 16%, Wipro climbing 16%, Infosys rising 16% and HCL Technologies increasing 15.5%. As per Live Mint, the index recovered from July lows but remains down about 18% this year, putting it on track for its worst annual performance since 2022.
The IT sector's outperformance is being driven by stronger-than-expected September-quarter results that have revived investor confidence in the sector's near-term growth prospects. Tech Mahindra's second-quarter revenue came in above expectations, aided by robust deal wins, while Wipro also reported stronger-than-expected quarterly revenue, with signs that delayed large deals could support growth in the coming quarters. HCLTech's quarterly performance, stronger AI-related revenue, and healthy deal wins bolstered confidence in the sector's earnings outlook, with the company raising the lower end of its FY27 guidance to 2.5–4% from 1–4%. TCS also delivered a healthy set of second-quarter results, contributing significantly to the sector's recovery. According to Live Mint, the September-quarter results have offered investors reassurance about the sector's growth prospects and helped revive sentiment towards IT stocks. TCS reported Q2 FY27 revenue growth of 11.2% year-on-year in rupee terms and a 15% rise in net profit to ₹13,884 crore, while Tech Mahindra's net profit rose 32.7% YoY to ₹1,586 crore and HCLTech reported a 21.2% increase in net profit to ₹5,132 crore.
HDFC Securities, in its Q2FY27 results preview earlier this month, flagged a muted quarter for Indian IT, projecting tier-1 QoQ constant-currency growth between -0.4% and +2.0%. The brokerage flagged soft deal wins, cautious client decision-making, and AI-led pricing pressure as persistent headwinds. However, the index's three-month return of 12.24% and monthly return of 13.03% signal a recovery from a prolonged downturn, though the YTD loss of 16.10% and one-year decline of 11.23% underline that the sector remains significantly off its 52-week high of 40,301. The sector's one-year forward P/E at 16.5x against a 10-year average of 21.8x indicates valuations remain near historical lows, with the NSE currently showing the index P/E at 19.85x. HDFC Securities maintained BUY on Infosys with a target price of ₹1,250, and preferred Persistent Systems and Mphasis among mid-caps. It downgraded Birlasoft to ADD and upgraded Cyient to BUY.
The IT sector's outperformance is being linked to a simultaneous selloff in AI infrastructure stocks due to monetisation concerns and over-leveraged positions. According to NDTV Profit, CoreWeave plunged 15% and Oracle nearly 9% on Oct. 14 amid worries over how AI data centres are being funded, while South Korea's Kospi, heavy with chipmakers Samsung Electronics and SK Hynix, plunged 8% the next day. Analysts say a slice of that money may have went looking for sectors that had already been punished, as Kranthi Bathini, equity director at WealthMills Securities, noted that the fact that Indian IT stocks have attractive valuations after a rough patch, and this is a sector that proven its resilience through various disruptions, including the dot-com bubble, 2008 financial crisis, and the Covid-19 pandemic. Narendra Solanki, head of fundamental research at Anand Rathi Share and Stock Brokers, told Business Standard that a rotation into Indian IT as an 'anti-AI' trade was a primary reason behind the recent gains, as chip stocks slid on concerns over stretched valuations and heavy capital expenditure. The recent sell-off in global AI-linked technology stocks, amid concerns over elevated valuations, heavy capital expenditure and the returns on AI investments, could serve as a supportive tailwind for the growth-oriented Indian market, potentially attracting foreign portfolio investors in the near future, according to ICICI Securities.
Rather than viewing AI only as a competitive threat, investors are increasingly tracking how Indian IT companies can monetise it through consulting, implementation, cloud infrastructure, software engineering and enterprise automation. TCS's annualised AI revenue crossed $3.1 billion in Q2 FY27, while HCLTech's annualised advanced AI revenue reached $876 million, up 78% YoY in constant currency terms. These numbers offer evidence of growing AI-related business, although the contribution to overall growth and profitability will be important to watch. The correction in global AI-linked technology stocks, amid concerns over elevated valuations, heavy capital expenditure and the returns on AI investments, has created a contrasting investment narrative, with some investors rotating towards Indian IT services companies that can benefit from enterprise spending on AI implementation, software modernisation and integration. TCS noted that AI is increasingly embedded across transformation programmes and AI revenues are growing across verticals, with the company witnessing increasing client adoption of AI-led modernization and governance solutions. However, management indicated that AI-related productivity/deflation has not yet been fully offset by incremental spending, suggesting that the rising AI revenue pool may take time to translate into a meaningful acceleration in overall company growth.
