The NIFTY IT index has rallied around 16% in October so far, supported by better‑than‑expected September‑quarter earnings from major IT companies, healthy deal wins and improving management commentary. IT services stocks stood out in Friday’s trade on October 23, with the sector witnessing strong buying interest after Cyient reported encouraging Q2 FY27 results on Thursday and ahead of Infosys’ September‑quarter earnings, due later in the day. Coforge and Mastek are also scheduled to announce their Q2 FY27 results today. IT stocks, which witnessed heavy selling pressure and turned out of investors’ favour, have made a sharp comeback and how!

The NIFTY IT index surged as much as 3.29% to hit an intraday high of 33,138.60 in early trade on Friday, October 23, before paring some gains. At 9:46 am, the index was trading 1.82% higher at 32,665.40, with nine of its 10 constituents in positive territory. Taking Friday’s intraday high into account, the index has rallied around 16% over the past month, reflecting renewed buying interest in IT stocks. The table below shows the key constituents’ performance as of 9:50 AM, with TCS and INFY posting gains of 3.16% and 2.37% respectively.

Better‑than‑expected earnings from IT majors have helped revive sentiment towards the sector. TCS reported Q2 FY27 revenue growth of 11.2% year‑on‑year (YoY) in rupee terms and a 15% rise in net profit to ₹13,884 crore. Tech Mahindra’s net profit rose 32.7% YoY to ₹1,586 crore, while HCLTech reported a 21.2% increase in net profit to ₹5,132 crore. Tata Elxsi’s performance was more mixed, with revenue improving sequentially but net profit remaining broadly flat year‑on‑year.

Healthy deal bookings have strengthened expectations of future revenue conversion. HCLTech reported record new deal bookings of $3.3 billion in Q2 FY27, up 27% YoY, while Tech Mahindra’s new deal wins rose 25.4% to $1.02 billion. TCS reported total contract value (TCV) of $9.6 billion, including a five‑year strategic partnership with Porsche AG and an agreement involving Best Buy’s global capability centre in India. These wins suggest that clients continue to spend on technology transformation, although converting contracts into revenue can take time.

Management commentary points to improving business momentum. HCLTech raised the lower end of its FY27 revenue growth guidance to 2.5%, from 1% earlier, while retaining the upper end at 4%. Tech Mahindra reported its twelfth consecutive quarter of margin expansion and said it had secured more than $1 billion in deal wins in each of the last four quarters. Such updates have helped investors look beyond near‑term demand uncertainties, though recovery remains uneven across companies and client segments.

The correction in global AI‑linked technology stocks, amid concerns over elevated valuations, heavy capital expenditure and the returns on AI investments, has created a contrasting investment narrative. Some investors appear to be rotating towards Indian IT services companies, which can benefit from enterprise spending on AI implementation, software modernisation and integration. This has supported the so‑called “anti‑AI trade” in Indian IT stocks, while AI is emerging as a new revenue opportunity with TCS’s annualised AI revenue crossing $3.1 billion in Q2 FY27 and HCLTech’s annualised advanced AI revenue reaching $876 million, up 78% YoY in constant currency terms.