Why are IT shares gaining in a falling market? Infosys up 2%, Persistent 1%

IT stocks outperformed the market on Wednesday as rupee breached the 92 per dollar-mark. Shares of Infosys, TCS, HCL Tech gained amid the market crash

Shares of Information Technology (IT) companies withstood the stock market crash on Wednesday, finding support in a falling rupee.

 

At 9:50 AM, the Nifty IT index was 1 per cent higher at 30,579.45 levels, and was the only sectoral gainer on the National Stock Exchange (NSE). Eight of the 10 index stocks were holding gains led by Infosys (up 2 per cent), Persistent Systems (0.86 per cent), Tech M, HCL Tech, Coforge, and Mphasis.

 

Wipro shares (down 1.1 per cent), and OFSS (down 0.09 per cent) were the only lowers at the time of writing this report. By comparison, the Nifty50 was trading 2 per cent lower at 24,366 level amid US-Iran war concerns.

 

Why are IT stocks rising in a weak market?

 

IT stocks gained in trade on March 4 as weakness in the domestic currency boosted their dollar-denominated revenues.

 

On Wednesday, Rupee breached the psychological 92-mark, hitting a record low of 92.05 per US dollar, as a widening conflict in West Asia drove oil prices sharply higher.

 

Indian IT companies earn most of their revenue in foreign currencies, especially US dollar, as a large part of their business belongs to clients based in the United States and other international markets.

 

Thus, when the Indian rupee depreciates against the US dollar, the value of dollar-linked revenue increases, boosting top-line of IT companies.

 

Notably, Infosys earned revenue worth $5,099 million (approximately $5.10 billion) in the December 2025 quarter (Q3FY26). In rupee terms, the reported revenue stood at ₹45,479 crore.

 

Historically, Infosys has earned 55-60 per cent of its revenue from North America, with Europe and other markets making up the rest.

 

Likewise, the US accounted for the biggest order book share (around $4.9 billion in in Q3FY26) for Tata Consultancy Services (TCS). The Tata group company earned revenue worth $7,509 million ($7.51 billion) in the last quarter.

 

Analysts on IT stocks outlook

 

Channel checks by analysts at Kotak Institutional Equities suggest that GenAI is improving delivery productivity, but enterprise context has meaningfully moderated efficiency versus greenfield use cases.

 

Besides, client productivity expectations, the brokerage said, has increased as GenAI assumptions are embedded into renewals, while the opportunity will expand only if AI pulls forward legacy modernisation and data‐readiness programs.

 

“Most companies indicate a steady demand environment, with no meaningful change in the past month. Margin expectations, thus, remain stable,” it said in a March 2 report.

 

IT companies, as per the brokerage, expect a potentially better, albeit marginal, FY27. The demand environment, they said, remains broadly stable, led by cost take out mandates for enterprises and improved macro uncertainty. Discretionary programmes, though, remained subdued.

 

KIE noted that companies are focused on generating savings from existing programmes and reinvesting them in AI initiatives.

 

“Gradual improvement in demand should aid in moderate acceleration, despite the likely higher deflationary impact as more GenAI programmes move into production. Over the medium term, we continue to expect IT service providers to remain relevant, though the growth will depend on the extent of productivity pass-through and timing of new revenue streams coming up,” it said.

 

Amid eased valuations after the recent selling in IT stocks, analysts at Kotak prefer TechM, TCS, Infosys, Coforge, and Hexaware Technologies within the IT pack.

 

Those at Emkay Global Financial Services have also turned ‘Overweight’ on the IT sector calling the tech selloff as “excessive”. They see IT stocks at an attractive entry point for long-term investors.

 

The brokerage has increased the IT sector exposure in its model portfolio to 10 per cent from 7 per cent, albeit noting that the change in stance is an "opportunistic call" rather than a "structural re-rating thesis".

 

The brokerage has exited Mphasis and added Infosys and HCL Tech, while retaining Hexaware Technologies.

 

“The sector is now trading in the 14-18 times price-to-earnings (P/E) with 4-6 per cent free cash flow (FCF) yields. This implies that the market has already factored-in anemic growth, and there are select stocks that offer outperformance opportunities. We see potential three-year returns between 13-25 per cent in a bull case and 1.6-13.4 per cent in a bear case," Emkay Global said in its report.

 

IT stocks, as per Tata Mutual Fund, are volatile right now, largely because AI is reshaping the industry. The actual impact of disruption to IT companies is gradual, which will take time to build additional revenue sources coming out of AI transition.

 

“While the transition is painful, strong free cash flow and healthy dividend yields should help support stock prices,” it said.

 

That said, against the market’s expectations of a growth recovery in 2026 (after two years of slow growth), there are chances of a delay or slowdown in growth.

 

“With earnings expectations stabilising and valuations still within a reasonable band, the risk of valuation-led downside looks limited. This combination of moderate growth, coupled with reasonable valuations, provides some support,” it said in a report.    =====================  Disclaimer: View and outlook shared belong to the respective brokerages/analysts and are not endorsed by Business Standard. Readers' discretion is advised.