Indian IT stocks surged sharply, led by gains in largecap names, after Nvidiaās strong results and upbeat revenue outlook revived optimism around the global AI spending cycle. The rally came despite lingering concerns over AI disruption and mixed brokerage views on the sector.
Shares of Indian IT companies surged sharply on Friday, with heavyweights including LTIMindtree, TCS, HCLTech and Infosys leading market gains.
The sharp rally pushed the Nifty IT index more than 3% higher. LTIMindtree shares jumped around 5%, while HCLTech and TCS gained around 4% each. Coforge, Tech Mahindra, Persistent Systems, Infosys and OFSS rose around 3% each, while Wipro and Mphasis gained 2%.
The surge in IT stocks came after their Wall Street peers rallied following Nvidiaās strong earnings. Nvidia shares jumped 9% after the chipmaker reported second-quarter revenue of $96.2 billion, up 106% from a year earlier and ahead of Wall Street estimates. The company also forecast revenue of about $108 billion for the current quarter, above analyst expectations.
"The results reassured investors on the durability of the global AI boom, sending technology stocks higher," Reuters quoted Devarsh Vakil, head of prime research at HDFC Securities, as saying.
Investors are now awaiting US Federal Reserve Chair Kevin Warshās comments on inflation, due later in the day at the Jackson Hole Symposium.
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Also read | Tenbaggers on Dalal Street! 19 stocks that rallied more than 1,000% in 5 years
What lies ahead for IT stocks?
IT stocks on Dalal Street have seen sharp upswings and downswings recently. Earlier this year, the sector witnessed a sharp sell-off after breakthroughs by AI startups fuelled concerns about potential disruption to the traditional IT services business model. Later, a sharp sell-off in global tech leaders proved to be a blessing in disguise for Indian IT stocks, which remained resilient amid the global tech rout.
HSBC said India can serve as an āanti-AIā diversifier as sharp swings in technology-exposed markets encourage foreign investors to broaden their portfolios. HSBC strategists Prerna Garg, Herald van der Linde and Yogesh Aggarwal said in a report that AI-rotation outflows from India have ālargely played outā.
While AI jitters continue to keep IT investors on edge, CLSA downgraded several heavyweight stocks and revised their target prices, although it remains bullish on several mid-tier IT vendors. In a recent note, CLSA highlighted that Q1 earnings were a mixed bag for Indian IT companies and their global peers. Basic Excel maths suggests that AI volumes could supersede deflation by FY30, taking US dollar revenue growth from low to mid-single digits, the international brokerage said.
Given the long gestation period and limited potential upside, CLSA downgraded its rating on Tata Consultancy Services (TCS), Infosys and Tech Mahindra to āHoldā, while Wipro and Mphasis were downgraded to āUnderperformā due to structural concerns.
Also read | IT crash ahead? CLSA downgrades TCS, Infosys, Wipro, other stocks; revises target prices. Hereās why
(With inputs from agencies)
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