Synopsis: IT stocks rallied sharply with Nifty IT rising nearly 5% after recent weakness, driven by easing US inflation concerns and expectations of slower rate hikes. Infosys surged over 5% on strong AI-first growth outlook. Despite near-term growth worries flagged by analysts, sentiment improved across major IT companies sector outlook improves.
IT stocks emerged as the top performers in early trade on Thursday, July 2, with the battered sector witnessing robust buying interest. After tumbling more than 30% in 2026, the NIFTY IT index rebounded sharply, led by broad-based gains across all its constituents.
The NIFTY IT index is a widely followed benchmark that reflects the performance of India’s leading information technology companies. Investors track it closely to gauge trends in global technology spending, demand for IT services, digital transformation initiatives, and the earnings outlook for software exporters, making it an important indicator of the sector’s overall health.
Nifty IT Index Overview
The NIFTY IT index surged as much as 4.75 percent to an intraday high of 27,005.90, rebounding from its previous close of 25,769.80. The sharp rally comes after the index remained under pressure for four straight trading sessions, during which it traded in the red amid sustained selling in IT stocks.
After losing more than 30% of its value so far in 2026, the NIFTY IT index staged a sharp rebound, with all constituent stocks trading higher. The index tracks the performance of India’s top information technology companies listed on the National Stock Exchange (NSE), comprising 10 leading IT firms, including Infosys, Tata Consultancy Services (TCS), HCL Technologies, Wipro, and Tech Mahindra.
Reason for the IT stocks Rally
Easing inflation concerns improved investor sentiment
Kevin Warsh said inflation expectations and risks have eased in recent weeks while reaffirming the Fed’s commitment to the 2% inflation target. This reassured investors that inflation may be coming under control, reducing fears of aggressive monetary tightening and boosting confidence in growth-oriented sectors like IT.
Reduced fears of aggressive rate hikes supported IT stocks
Although the Fed maintained a hawkish stance, Warsh’s comments suggested that inflation risks are moderating. This gave investors hope that future interest rate increases may not be as aggressive as previously feared, improving the outlook for technology companies that are sensitive to higher borrowing costs.
Positive outlook for North American IT spending
Indian IT companies generate a large share of their revenue from North America. Easing inflation expectations reduces the risk of a sharp slowdown in US discretionary spending and corporate technology budgets, strengthening expectations of stable demand for IT services and driving the rally in IT stocks.
Persistent near-term growth concerns despite long-term potential
Nomura believes Indian IT companies are likely to witness anaemic growth in FY27 due to macroeconomic uncertainty, including geopolitical tensions in the Middle East and the uncertain US interest rate outlook. These factors are keeping client spending on discretionary technology projects subdued, particularly for large-cap IT firms.
The brokerage also highlighted that weak technology spending is intensifying competition among IT service providers, with AI-driven productivity gains increasingly benefiting customers rather than vendors. As a result, Nomura has cut its FY27 and FY28 revenue growth estimates by 100–200 basis points and expects another subdued year for the sector. Added Reason for the Infosys Rally
Infosys Bets Big on the AI-First Services Opportunity
Along with other reasons, the added reason for the rally of Infosys is that at Infosys’s 45th Annual General Meeting in late June 2026, Nandan Nilekani said AI will not replace IT services companies but will amplify them. He said Infosys is targeting a $400 billion AI-first services opportunity by 2030, calling AI a major growth driver rather than a threat.
Nilekani said that although AI coding tools are improving productivity, significant work remains across the software development lifecycle. He emphasized that the biggest opportunity lies in helping large enterprises bridge the AI deployment gap, adding that companies that adapt quickly and embrace AI will be best positioned for the future.
Stocks’ performance
When last seen, Infosys shares were trading 5.34% higher at Rs. 1,038 apiece on the BSE, while Tech Mahindra was up 4.24% at Rs. 1,420. HCL Technologies shares were trading at Rs. 1,078, up 4.15%, and Wipro Ltd was up 2%.
Persistent Systems shares were up 5.63% at Rs. 4,570 apiece on the BSE, and Coforge Ltd was up 5.53% at Rs. 1,448. Mphasis Ltd shares were trading 5.37% higher at Rs. 2,240 apiece.
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