IT stocks came under pressure on December 26 after Infosys announced a hike in entry-level salaries for freshers, offering compensation packages of up to Rs 21 lakh per annum for specialised technology
roles. The move sparked concerns around cost pressures, prompting analysts to weigh in on its potential impact on sector valuations and the outlook ahead.
The weakness dragged the Nifty IT index down 0.86 percent to 38,638.80 as of 12:30 pm, marking its third consecutive session of losses.
What lies ahead for IT stocks
Kalp Jain, Research Analyst at INVasset PMS, said Indian IT companies are navigating a challenging phase as sector dynamics continue to evolve. According to him, Infosys’ decision to raise entry-level salaries highlights intensifying competition for digital talent.
“This move reflects broader efforts by IT firms to attract highly skilled professionals in areas such as artificial intelligence, cloud computing and advanced engineering, where demand remains strong,” Jain said.
However, he noted that overall salary growth across the sector is moderating, with average increments expected to ease slightly compared with recent years. Companies are attempting to balance cost pressures and margin discipline while retaining talent. Despite this, wages and benefits continue to rise in niche and high-demand skill areas, adding to operating costs even as revenue growth slows in certain segments.
“For IT stocks, the road ahead will depend on how effectively companies manage talent costs while sustaining competitive pricing, expanding service offerings and securing strong deal pipelines. Since wages form a key cost component, investors will closely track whether revenue and margin expansion can offset near-term pressure from higher payroll expenses,” Jain added.
Siddharth Maurya, Founder and Managing Director of Vibhavangal Anukulakara, believes the salary hikes are unlikely to meaningfully impact sector valuations in the near term. He said Indian IT stocks are currently influenced by a volatile mix of earnings momentum, global demand trends and talent costs.
“Investors are more focused on deal pipelines, margins, demand from key markets such as the US, and broader macroeconomic cues. IT stocks are likely to react more to changes in global demand and earnings visibility than to compensation-related developments,” he said.
Dhanshree Jadhav, Analyst – Technology Services at Choice Institutional Equities, said Infosys is proactively positioning its workforce to be AI-ready amid an expected acceleration in AI-led global demand. According to her, the salary hikes aim to curb attrition and enhance Infosys’ ability to attract high-quality freshers, especially at a time when entry-level pay across Indian IT companies has largely stagnated, making them less competitive compared to start-ups.
“We believe the global IT industry is at an inflection point, where sustained growth will increasingly be driven by upfront investments in talent and AI-led infrastructure to stay ahead of the curve,” she said.
IT stocks had already seen pressure earlier this week after the Donald Trump-led US administration announced plans to replace the longstanding H-1B visa lottery system with a new framework that prioritises skilled, higher-paid foreign workers. A press release on the proposed rule said it aligns with other policy changes, including a presidential proclamation requiring employers to pay an additional $100,000 per visa as a condition of eligibility.
Top IT losers today
Coforge was the top loser on the Nifty IT index, falling over 3 percent after a report said the company is in advanced talks to acquire a global digital engineering firm in a deal valued at more than $1 billion, which could be among the largest transactions in the sector.
Shares of LTIMindtree, Mphasis, Tech Mahindra, Tata Consultancy Services (TCS) and HCL Technologies declined over 1 percent each. Meanwhile, Infosys, Wipro and Persistent Systems were trading marginally higher.
