Nifty IT stocks extend surge, gain 5% in 3 days; Should you buy this rally?

Nuvama noted that IT services companies outperformed expectations in Q2, supported by stronger growth, margin expansion, and healthy deal wins

India’s information technology (IT) stocks extended their winning streak for a third consecutive session, driving benchmark indices higher as analysts reiterated bullish calls post a better-than-expected second-quarter earnings.

 

On Wednesday, the Nifty IT index rose as much as 1.96 per cent, while it has risen 4.8 per cent in the last three sessions. As of 11:11 AM, the IT gauge was up 1.8 per cent, while the Nifty50 index rose 0.72 per cent. 

 

Shares of Tech Mahindra (up 3.09 per cent) and Mphasis (up 2.75 per cent) led the gains on Wednesday. LTIMindtree and Tata Consultancy Services (TCS) shares were trading up over 2 per cent. 

 

 

Since the beginning of the month, the IT index has outperformed the market by surging 3.04 per cent as against a 0.6 per cent gain in the benchmark index. Infosys (up 4.8 per cent), Persistent Systems (up 3.6 per cent), and HCL Technologies (up 3.2 per cent) were the top gainers this month.   FOLLOW STOCK MARKET UPDATES TODAY LIVE

What's driving the rally in Nifty IT Index? 

Infosys reported a profit and revenue beat in the second quarter of the financial year 2026 (Q2FY26) and upped its revenue guidance. Wipro and TCS, meanwhile, beat second-quarter revenue expectations. Further, the tier-2 companies continued to outperform tier-1 players, analysts noted. 

 

According to Nuvama Institutional Equities, Indian IT services companies outperformed expectations in Q2, supported by stronger growth, margin expansion, and healthy deal wins. Most firms reported sequential growth or stable performance, with margins aided by foreign exchange gains and operational efficiencies, it said in a report on November 11. 

 

Nuvama noted that the demand environment is likely to remain challenging over the next one to two quarters due to macroeconomic and tariff-related uncertainty. However, it remains positive on the medium-to-long-term outlook, as elevated technology debt among enterprises is expected to drive a revival in spending once macro conditions improve.  ALSO READ | Adani Enterprises surges 6% on heavy volumes; here's why 

Earnings estimates have already been meaningfully revised downward, and IT stocks have corrected by about 15 per cent over the past 12 months, Nuvama said. As a result, valuations now appear attractive, nearly in line with their ten-year averages, it said. Nuvama maintains a 'Buy' rating on Coforge, Persistent Systems, Mphasis, LTIMindtree, Hexaware, Tata Consultancy Services, and Infosys, while remaining negative on Tech Mahindra and Birlasoft.

 

In a recent report, Kotak Institutional Equities said that the results of IT companies indicated that demand trends are stabilising, with fewer program cancellations and easing headwinds across select sectors. 

 

After three years of muted growth, frustration is evident in multiple deratings. The prevailing belief that IT firms are 'AI losers' overlooks the bigger culprits: macro uncertainty and client captive shifts. Recovery in discretionary spending is, therefore, pivotal to dispel fears of structural decline, the Kotak report said.  The optimism for IT stocks also comes as US President Donald Trump indicated on Wednesday that Washington and New Delhi are nearing a new trade agreement, adding that tariffs imposed on India may be lowered in due course. "We’re working on a deal with India, a very different one from before. They don’t love me right now, but they will again. We’re getting a fair deal," Trump said.