Indian IT stocks have recovered about ₹3.87 lakh crore in market value in October, while foreign investors bought ₹6,463 crore of sector shares during the September quarter.

Key Takeaways

  • Nifty IT has risen about 17% in October, with TCS leading major technology shares with a 23% gain.
  • Foreign investment has been selective: ownership increased in Wipro and Infosys but declined marginally in TCS and Mphasis.
  • Jefferies sees further rerating potential in selected stocks, while HSBC, Axis Mutual Fund and PL Capital highlight growth and AI-related risks.

Table of Contents

Indian IT stocks recover value, but foreign buying is uneven

The combined market capitalisation of Nifty IT constituents increased from roughly ₹22.01 lakh crore to ₹25.88 lakh crore during October. Alongside TCS’s 23% advance, Tech Mahindra gained 20%, Mphasis and Wipro each rose 19%, Infosys climbed 17% and HCL Technologies added 16%. Oracle Financial Services Software moved against the trend, falling about 5%.

The index’s roughly 17% monthly rise follows a decline of about 20% in the first two months of 2026. Since February, Nifty IT has outperformed the Nifty 50 by 12 percentage points, with most of that relative improvement occurring in October.

NSDL data showed ₹6,463 crore of foreign portfolio investment in IT stocks during the September quarter.

Foreign ownership in Wipro increased from 8.85% in June to 9.46% in September, while Infosys’s rose from 27.09% to 27.44%. Oracle Financial Services Software recorded a 173-basis-point increase to 11.43%, despite its October share-price decline. Persistent Systems saw no change, and TCS and Mphasis registered marginal decreases.

Jefferies links the rally to changing growth assumptions

Jefferies attributed the October advance primarily to price-to-earnings rerating, noting that most IT stocks had not received revenue-growth or earnings-per-share upgrades. Its analysts, Akshat Agarwal and Ayush Bansal, pointed to more resilient expectations for longer-term growth.

Consensus US-dollar revenue-growth forecasts for FY28 had not suffered material cuts after the second-quarter FY27 results, unlike after the preceding two reporting periods. Companies’ ability to keep growing despite weak macroeconomic conditions and AI-related deflation had also made investors more willing to reconsider long-term growth assumptions, the analysts said.

Jefferies estimates that current valuations imply organic constant-currency revenue growth of 0%–9% for large IT companies over FY26–FY36 and 6%–14% for mid-sized firms. For most companies, those rates are two to four percentage points below growth delivered during FY16–FY26.

Infosys and Sagility show the largest discounts against their historical growth paths, at about six percentage points. Jefferies identified Infosys and TCS as the only large-cap IT names with further rerating scope, with Sagility standing out among mid-caps.

Earnings outlook keeps other institutions cautious

HSBC said FTSE India IT trades at 18 times forward earnings, below its five-year average of about 23 times. It cautioned that the discount reflects weaker growth: sector earnings expansion has slowed from 4%–5% in recent years to about 2%–3%, largely because of AI-led deflation.

The bank expects FY27 to be the sector’s most challenging year, followed by recovery in FY28 and FY29. Even then, it forecasts only mid-single-digit growth.

Axis Mutual Fund remains underweight on IT services. It said AI spending is still concentrated on infrastructure rather than discretionary technology services, while traditional service lines remain under pressure. AI could weigh on margins and growth before becoming a meaningful revenue source.

The fund house also highlighted growing competition among large and mid-sized IT firms, consultants, and specialist AI and data providers. A weaker rupee could help margins, although companies may reinvest some of that benefit in new capabilities.

PL Capital retained a 150-basis-point underweight position in IT services, citing slow growth and uncertainty over AI’s profitability impact. It sees potentially faster adjustment and better growth prospects among mid-cap companies, but said valuations remain demanding in many cases.

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