The Nifty IT index is set for its best monthly performance in six years, with the index gaining over 16.7% this month, marking its best monthly performance since July 2020 when it rose 22.5%. As reported by The Hindu BusinessLine, the Nifty IT index has outperformed the index of U.S. chipmakers by the widest margin for any month since 1999, according to a Goldman Sachs note dated July 29. This represents the best performance by any sectoral index in the market this month, with July historically turning out to be a positive month for the Nifty IT index, as it has delivered positive returns every year this month from 2020, barring 2025. The divergence signals investors are growing weary of the AI-driven rally in chip stocks while renewing interest in India's IT services firms after a years-long slump. All Nifty IT constituents have delivered positive returns for the month, with gains led by beaten-down names. Shares of Persistent Systems, HCLTech and LTM have gained between 20% to 25% this month, while TCS, Tech Mahindra, Coforge, Mphasis and Infosys are up between 10% to 20% for the month. Wipro and Oracle Financial are the underperformers of the month with gains of 6% each. According to CNBC TV18, Oracle Financial continues to remain the best performing IT stock on a year-to-date basis, with a 45% advance, while Coforge and Tech Mahindra also turned positive for the year recently.
Indian IT stocks have erased months of investor pessimism in a spectacular July reversal, adding ₹3.9 trillion in market value as short sellers unwound bearish bets and reassessed AI disruption concerns. As reported by The Hindu BusinessLine, Indian equities lagged Asian and emerging-market peers last year and throughout the first half of 2026, weighed down partly by the absence of AI-related heavyweights in benchmark indexes. But that weakness is now proving a strength, as a pullback in AI-related shares rattles markets including South Korea and Taiwan and prompts investors to seek alternatives. Broader Indian markets also outperformed peers in July, with the benchmark Nifty 50 rising 2% compared to a 24% drop in South Korea's technology-heavy index and a 7% drop in Taiwan's equity benchmark. Foreign investors bought more than $1.6 billion worth of Indian equities in July, marking a notable turnaround after foreign investors sold about $29 billion of Indian equities in the first six months of the year. TCS generated the biggest absolute wealth gain, adding nearly ₹1.4 trillion in market capitalisation during the month, while HCL Tech added about ₹76,226 crore and Infosys ₹62,825 crore. Together, the three companies accounted for nearly three-fourths of the sector's ₹3.9 trillion market-value increase. The rally comes as the global technology trade has lost momentum, with the Nasdaq 100 about 11% below its June peak and the Philadelphia Semiconductor Index correcting around 25% from its record closing high.
Major investment firms have turned increasingly positive on India as the AI trade reversal gains momentum. As reported by The Hindu BusinessLine, HSBC upgraded India to "neutral" from "underweight," while UBS lifted its rating to "attractive" from "neutral". Goldman Sachs and Bernstein have flagged the prospect of a second-half rebound for the Nifty 50. Todd McClone, a portfolio manager at William Blair Investment Management, which oversees about $65 billion, says there has been a major sector rotation over the past couple of weeks. India has emerged as the "obvious destination" for investors trimming their exposure to North Asian and U.S. technology stocks, said McClone, whose fund started turning positive on India in April and added to positions in June after the central bank took steps to support the rupee. Ji Young Park, senior Asia ex-Japan equity portfolio manager at Amundi, which manages $2.8 trillion in assets, said the firm was "constructive" on India as concerns over high oil prices were largely reflected in valuations. Park expects AI-driven rotation into India to persist as valuations in sectors such as financials, healthcare and industrials have become attractive.
This tech blitz is a result of three forces converging: valuation re-rating, decent earnings and sector rotation. According to Business Standard, after the IT index plummeted 34% in the first half of the year amid fears of AI-led revenue deflation, it became the market's cheapest, and "beaten-down quality eventually attracts buyers," said Vaqarjaved Khan, Sr. Analyst – Fundamental, Angel One. Steady Q1 FY27 earnings eased fears that AI would gut the services model overnight, with JM Financial noting that Q1 FY27 earnings turned out to be largely in line or better than expected on lower expectations, while Q2 FY27 commentary suggests a stable demand environment. Unwinding of AI-related trades in developed markets has also aided this rise. "For much of this cycle, global money chased AI beneficiaries while Indian IT was seen as the AI victim. As that trade shows signs of unwinding, the "reverse AI trade" is rotating capital back toward under-owned, reasonably-valued services players," said Khan, but cautioned that this is a positioning shift, not a fundamental re-rating. Mayuresh Joshi, head of equity research, India, at William O'Neil & Company, said India could emerge as one of the few markets where growth remains sustainable compared with the rest of the world. McClone of William Blair said Indian corporate earnings were now moving "onto an upward trajectory" after slowing in 2024 and 2025.
The benchmark Sensex on Wednesday ended the session at 77,655, a gain of 889 points, or 1.2 per cent, while the Nifty ended at 24,250, up 265 points, or 1.1 per cent. As reported by Business Standard, Wednesday's gains were the best for the Nifty since June 12, 2026, and for the Sensex, the best since July 17, 2026. The total market capitalisation of BSE-listed firms rose by ₹4.2 trillion to ₹483 trillion. Market breadth was strong, with 2,533 stocks advancing and 1,705 declining. Foreign portfolio investors were net buyers of Indian equities worth ₹2,982 crore, their biggest one-day purchase since June 19, while domestic institutional investors were net buyers worth ₹998 crore. The rotation away from AI-related trades is showing up in flows, with foreign investors buying more than $1.6 billion worth of Indian equities in July, marking a notable turnaround after foreign investors sold about $29 billion of Indian equities in the first six months of the year. Whether that proves durable will depend on two key factors, analysts said: a recovery in earnings after several lacklustre quarters and a de-escalation of tensions in the Middle East. Jefferies last week upgraded the sector from underweight to neutral, saying the reversal of the AI trade could drive tactical upside in the sector, particularly after this year's sharp decline. Market analysts said the correction in technology stocks across South Korea may have encouraged global investors to explore relatively less AI-dependent emerging markets such as India.
