Set for the best month since Nov 2024, is Nifty IT out of the woods?

Among individual stocks, Infosys has risen by 4 per cent, while Tata Consultancy Services (TCS) and HCL Technologies have risen by 5.8 per cent and 9.8 per cent, respectively thus far in October

Clawing back on the bourses amid in-line September 2025 quarter (Q2FY26) results, the Nifty IT index has surged 6.6 per cent so far in October as against 5.4 per cent rise in the Nifty 50. This, according to Bloomberg data, is the IT index’s best monthly gain since November 2024. 

Among individual stocks, Infosys has risen by 4 per cent, while Tata Consultancy Services (TCS) and HCLTech have risen by 5.9 per cent and 9.9 per cent, respectively thus far in October. 

Analysts, however, remain cautious regarding the rebound and suggest that the optimism around India’s IT stocks could be short-lived as muted growth visibility may dampen the sentiment. 

That apart, the fear of the US imposing tariffs may cap significant upside. “The outlook for the IT sector remains weak and, at best, neutral with the dollar revenue growth in the low single digits on a year-on-year basis. The wealth-creation story in largecap IT stocks is over,” said G Chokkalingam, founder and chief investment officer at Equinomics Research. 

On the bourses, the Nifty IT has shed about ₹7 million in market capitalisation so far in calendar year 2025 (CY25), declining 17.5 per cent. By comparison, the Nifty50 is up 9.6 per cent. Largecap names such as Infosys and TCS have corrected over 20 per cent during the period, while Wipro is down 19.7 per cent. HCLTech and Tech Mahindra have slipped 20 per cent and 15.7 per cent, respectively. 

Against the backdrop of rising ambiguity over growth outlook, analysts believe investors may take cover under mid-cap IT stocks. 

Chokkalingam, for instance, suggests investors can ignore largecap IT stocks and look at mid and smallcap names instead.  “Between 2014 and 2019, the IT sector saw a wave of mergers and acquisitions, and the current phase of sluggish growth could trigger further consolidation. Small and mid-sized firms have enough cash on hand to invest in future growth,” he added. 

Sushovon Nayak, research analyst at Anand Rathi Institutional Equities, however, suggests taking selective midcap exposure. “Midcap IT companies are currently trading at around 30 times FY27 price-to-earnings. We prefer those that continue to deliver strong execution, like Persistent Systems, which reported a standout quarter driven by GenAI-led efficiencies and strong execution, coupled with BFSI focused plays such as Mphasis and value plays such as Mastek,” he said. 

Infosys reported a profit and revenue beat in Q2FY26 and upped its revenue guidance. Wipro and TCS, meanwhile, beat second-quarter revenue expectations. 

Nayak of Anand Rathi said that largecap IT firms remain reasonably placed as most companies have guided that the second half of the year will be better than the first, supporting the growth outlook. 

“Additionally, we expect IT companies to benefit from the growing global AI ecosystem.” he said, picking LTIMindtree, Infosys, and HCLTech as top largecap IT bets.