- IT index surged 3.34% in a single day – the biggest jump since May 2025.
- Four major stocks (Infosys, Tech Mahindra, Oracle Financial Services, and TCS) logged >5% weekly gains.
- AI‑led projects are the new growth engine, offsetting a traditionally weak December quarter.
- Guidance upgrades from Infosys (3‑3.5% FY25 revenue growth) and HCL (4‑4.5%) signal upside.
- Contrasting outlooks: Wipro trims expectations, highlighting sector divergence.
You missed the IT rally because you trusted stale data.
Why the Nifty IT Index Jump Beats Historical Seasonality
December has long been a lull period for Indian IT earnings, with client furloughs and budget freeze‑outs typically dragging revenue growth into the negatives. This year broke the pattern: the Nifty IT index closed a week up 2.8%, delivering its strongest weekly gain in over a month. The surge was powered by a 3.34% single‑day spike – the highest since May 2025 – and a rally across eight of the ten index constituents.
Seasonal weakness is usually a signal to stay defensive, but the current breakout suggests that demand dynamics are resetting, thanks largely to AI‑driven modernization projects. When a sector defies its own calendar, it often indicates a structural shift rather than a fleeting blip.
How AI‑Driven Deals Are Reshaping the Revenue Landscape
Clients across financial services, energy, and healthcare are now allocating spend to AI‑centric transformation. Infosys reported a modest 0.45% sequential revenue increase to $5.1 bn, yet the growth came from high‑margin AI contracts. TCS posted a 0.6% rise to $7.51 bn, keeping margins flat at 25.2% despite higher labour costs – a testament to pricing power in AI services.
HCL Technologies delivered the standout performance, with revenue up 4.1% sequentially and profit climbing 10.5%. The firm’s AI‑focused deals pushed its services segment growth to 4.75‑5.25% YoY on a constant‑currency basis, reinforcing the premium pricing that AI expertise commands.
Definition: Constant‑currency terms strip out the effects of foreign‑exchange fluctuations, giving investors a clearer view of organic growth.
Competitor Landscape: Infosys vs. TCS vs. HCL vs. Tech Mahindra
While all four giants posted gains, their trajectories diverge:
- Infosys – Stock rallied 5.7% to ₹1,689. Full‑year revenue guidance lifted to 3‑3.5% as AI deals accelerate.
- TCS – Steady growth with margins steady; no guidance change, but market share in AI services is expanding.
- HCL Tech – Outpaced peers with 4.1% revenue growth; EBIT margin guidance of 17‑18% signals confidence.
- Tech Mahindra – Revenue jumped 8.3% to ₹143.93 bn, driven by communications and manufacturing segments, reflecting diversified AI adoption beyond pure software.
Wipro, by contrast, trimmed its outlook, forecasting flat‑to‑2% sequential revenue growth. The divergence underscores the importance of picking winners within the sector rather than buying the entire basket.
Technical Snapshot: What the Charts Reveal
On the daily chart, the Nifty IT index broke above its 20‑day moving average (MA) and held the 50‑day MA as support, a classic bullish signal. Volume spiked 45% on the rally day, confirming strong buying conviction. Relative Strength Index (RSI) sits at 62, suggesting momentum is still intact but not yet overbought.
For individual stocks, Infosys and Tech Mahindra both cleared their 200‑day MA, a historical indicator of long‑term uptrends. Traders often view a bounce off the 200‑day MA as a low‑risk entry point.
Investor Playbook: Bull and Bear Scenarios
Bull Case
- AI‑centric deal pipeline continues to expand, pushing revenue growth above 5% YoY for the sector. \n
- Margin compression eases as firms pass higher labour costs onto clients via premium AI pricing.
- Foreign institutional inflows resume, attracted by the sector’s resilience and upside.
Positioning: Long the sector ETF, overweight Infosys, HCL, and Tech Mahindra. Consider call options on Infosys if you anticipate further upside.
Bear Case
- Tariff uncertainties and geopolitical tensions dampen offshore demand.
- Deal bookings dip below $3 bn for two consecutive quarters, indicating a slowdown.
- Higher wage inflation erodes margins, especially for firms that cannot fully price AI services.
Positioning: Reduce exposure to Wipro and any sub‑$5 bn market‑cap players. Hedge with protective puts on the Nifty IT index.
Bottom line: The recent rally is more than a seasonal bounce—it’s a market‑wide re‑pricing of AI‑driven growth. Align your portfolio with the winners, but keep a guard against sector‑wide headwinds.