- Wipro surged 4.6% to ₹247.3, pulling the Nifty IT index up 2%.
- LTI Mindtree, TCS, Persistent, Mphasis and Coforge all posted gains between 1.5%‑3%.
- The rally follows a budget‑driven tax holiday for foreign cloud‑service providers, effective until 2047.
- IndiaAI Mission earmarks ₹104 billion to build a public AI‑compute platform with 10,000+ GPUs.
- Analysts see a steady, compounding earnings tailwind for large IT services rather than a speculative spike.
You missed the IT rally that just defied a market slump – and here's why it matters.
Why Wipro’s Surge Signals a New Era for Indian IT
Wipro’s 4.6% jump wasn’t an isolated flash; it was the catalyst that lifted the entire Nifty IT index by 2%. The move snapped a two‑day losing streak and sent a clear signal that investors are pricing in a structural shift, not a one‑off bounce. The stock’s price action also aligns with a broader re‑rating of the sector’s growth story, driven by policy support for data‑centre infrastructure and AI compute.
How the Budget’s Data‑Centre Tax Holiday Reshapes the IT Landscape
Union Finance Minister Nirmala Sitharaman announced a tax holiday on profits earned by foreign firms that provide cloud services from Indian data centres, lasting until 2047. In plain terms, a tax holiday means a temporary exemption from corporate income tax, boosting after‑tax cash flow. The policy also mandates that foreign cloud providers route Indian customer contracts through an Indian reseller, creating a new revenue stream for domestic IT players.
Furthermore, the budget introduced a 15% safe harbour on cost for related‑entity data‑centre services, effectively lowering the cost base for multinational tech giants that set up Indian subsidiaries. This cost cushion is expected to accelerate foreign capex in India, expanding the addressable market for home‑grown system integrators.
IndiaAI Mission: The GPU War and Its Ripple Effect on Earnings
In March 2024 the government approved the IndiaAI Mission, allocating ₹104 billion to create a public AI‑compute infrastructure featuring more than 10,000 graphics processing units (GPUs). GPUs are the workhorses of modern AI, delivering the parallel processing power required for large‑scale model training and inference.
By making such compute accessible through a public‑private partnership model, the mission lowers the barrier to entry for mid‑size firms and start‑ups, while also feeding demand for system‑integration, AI model development, and managed services – all core competencies of the big Indian IT houses.
Competitive Landscape: What Tata, Infosys and HCLTech Are Doing
While Wipro and TCS led the day’s gains, peers like Tata Consultancy Services, Infosys and HCLTech are already positioning themselves to capture the upside. Tata Consultancy Services announced a strategic partnership with a leading global cloud provider to co‑deliver AI‑enabled solutions, leveraging the upcoming tax incentives.
Infosys is expanding its AI practice through acquisitions of niche analytics firms, betting on the “data‑intensity” effect highlighted by market experts. HCLTech, meanwhile, has rolled out a “Hybrid Cloud‑AI” suite aimed at BFSI and manufacturing customers, directly targeting the government‑driven digitisation agenda.
Collectively, these moves suggest a sector‑wide shift from pure coding services to higher‑margin AI, analytics, and cloud‑led transformation projects.
Historical Parallel: Past Policy Wins and Stock Reactions
India’s IT sector has responded robustly to policy catalysts before. In the 2016‑17 fiscal year, a reduction in the software export tax rate from 15% to 12% spurred a 30% rally across the Nifty IT index within six months, as exporters enjoyed higher net margins. The current tax holiday mirrors that earlier stimulus, but with a focus on domestic data‑centre capacity, which could magnify the effect by creating a localized ecosystem rather than simply boosting export profitability.
Another precedent is the 2020 “Digital India” push, which saw a surge in government‑led cloud adoption and a consequent 18% rise in the IT index over the next year. The common thread across these episodes is that fiscal incentives translate quickly into higher order‑growth contracts for system integrators, driving earnings momentum.
Investor Playbook: Bull vs Bear Cases
Bull Case: The tax holiday and AI‑compute fund dramatically expand the TAM (total addressable market) for Indian IT services. Large‑cap players capture multi‑year, high‑margin contracts in AI automation, analytics and cloud migration. Earnings guidance is upgraded, leading to a 20‑30% upside in valuation multiples over the next 12‑18 months.
Bear Case: Implementation delays, regulatory ambiguity around the reseller requirement, or a global slowdown in cloud‑spending could blunt the upside. If foreign firms choose to locate data centres elsewhere, the anticipated capex surge may never materialise, leaving the sector’s earnings growth to rely on organic demand, which could be modest.
Investors should weigh exposure based on risk tolerance: a core allocation to Wipro, TCS or HCLTech offers a steady earnings runway, while a tactical tilt toward mid‑tier digital engineering firms (e.g., Mindtree, Persistent) could capture higher‑growth niches if AI deployment accelerates.
In summary, today’s rally is more than a market anomaly; it is the first price reaction to a policy framework that could redefine the economics of Indian IT for the next two decades.