Nifty IT set for best month since July 2024; but is it out of the woods?

Analysts remain mixed on IT stocks' outlook, with some cautioning that the optimism around the technology pack could be short-lived

Clawing back on the bourses amid in-line September 2025 quarter (Q2-FY26) results, the Nifty IT index has surged 7.3 per cent so far in October as against 5.5 rise in the Nifty 50. This, as per Bloomberg data, is the IT index's best monthly gain since July 2024. 

Among individual stocks, Infosys has risen by 4.3 per cent, while Tata Consultancy Services (TCS) and HCL Technologies have risen by 6.8 per cent and 10.7 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 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 large-cap 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 (market-cap) so far in calendar year 2025 (CY25), declining 16.5 per cent. By comparison, the Nifty50 is up 9.8 per cent.

 

Large-cap names such as Infosys and TCS have corrected over 20 per cent during the period, while Wipro is down 19 per cent. HCL Tech and Tech Mahindra have slipped 19 per cent and 14 per cent, respectively.

Large vs mid-cap IT stocks

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

 

G Chokkalingam of Equinomics Research, for instance, suggests investors can ignore large-cap IT stocks and look at mid- and small-cap 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 exposure in the mid-cap segment. "Mid-cap 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.

Q2 results review

On the operational front, Infosys reported a profit and revenue beat in Q2-FY26 and upped its revenue guidance to 2-3 per cent in constant currency (CC) terms for FY26, compared with 1-3 earlier.

 

Wipro and TCS, meanwhile, beat second-quarter revenue expectations, but fell short of meeting net profit estimates. While HCL Tech raised guidance, its revenue beat estimates. Separately, analysts noted a softer growth visibility for Tech Mahindra.

 

"While early signs of demand stabilisation have emerged, visibility into calendar year 2026 remains weak. Moreover, AI-led productivity gains are becoming more mainstream across the sector - a trend that could weigh on valuation multiples in the near-term," warned analysts at Goldman Sachs.

 

Nayak of Anand Rathi said that large-cap IT firms remain reasonably placed as most companies have guided that the second half of the year will be better than the first, supporting growth outlook. “Additionally, we expect IT companies to benefit from the growing global AI ecosystem," he said, picking LTIMindtree, Infosys, and HCLTech as top large-cap IT bets.