Indian IT stocks rallied on Wednesday, October 21, as investors responded to strong quarterly earnings and an optimistic sector outlook from global brokerage
Jefferies. L&T Technology Services (LTTS) emerged as the biggest gainer, with its shares climbing sharply after the company reported robust results for the September quarter. The Nifty IT index advanced as much as 2.6 per cent to an intraday high of 32,348.25, comfortably outperforming the benchmark Nifty 50, which rose around 1 per cent. Buying was broad-based, with every constituent of the IT index trading in positive territory during the session. L&T Technology Services shares surged as much as 15 per cent, making the engineering and technology services company the standout performer in the sector. Wipro gained around 4 per cent, while Infosys, Tata Consultancy Services (TCS), Tech Mahindra, HCL Technologies and Mphasis advanced between 2 per cent and 3.5 per cent. Persistent Systems, LTIMindtree and Coforge also recorded gains of more than 1 per cent each, highlighting the breadth of the rally. The upbeat movement follows a promising start to the September-quarter earnings season. Results from major IT companies, including TCS and HCL Technologies, have exceeded expectations, helping ease some investor concerns about the outlook for technology spending and the impact of artificial intelligence (AI) on traditional IT services. Why Are IT Stocks Rising Today? Better-than-expected earnings and expectations of stabilising business conditions have supported buying interest in IT shares. Investors are looking for signs that technology companies can sustain growth despite global economic uncertainty and changes in corporate spending priorities. L&T Technology Services delivered particularly strong numbers for the July-September quarter of FY27. Its revenue from operations increased 3.4 per cent sequentially and 12.1 per cent year-on-year to Rs 3,040.4 crore. Revenue in dollar terms rose 2.7 per cent quarter-on-quarter and 4.8 per cent year-on-year on a constant-currency basis to $317 million. Net income climbed 53.7 per cent from the preceding quarter and 66.8 per cent from a year earlier to Rs 548.2 crore. Investor sentiment has also received support from Accenture's guidance for the next financial year, which has renewed hopes of a recovery in conventional technology expenditure. However, the sector continues to face risks from elevated crude oil prices, high US bond yields and persistent foreign investor outflows. Within IT, concerns over AI-led changes in client spending, future revenue growth and the sustainability of valuations remain important factors for investors. Jefferies Sees Re-Rating Potential In Infosys, TCS In its October 21 note, Jefferies said Indian IT stocks could experience a valuation re-rating if companies continue to demonstrate earnings resilience and outperform subdued growth expectations. “With IT firms still delivering growth despite weak macro and AI-deflation, investors are more willing to revisit their terminal growth assumptions,” the brokerage said in a note. Jefferies believes the sector's earlier share-price correction has already accounted for a relatively cautious outlook, potentially creating room for a recovery if companies avoid further earnings disappointments. The brokerage identified Infosys and Sagility as offering attractive risk-reward opportunities among their respective peers. It also highlighted Infosys and TCS as the only large-cap IT stocks with re-rating potential under its assessment. Jefferies retained its 'Hold' rating on Infosys but raised its target price to Rs 1,160 from Rs 1,020. For TCS, it maintained its 'Underperform' rating while increasing the target price to Rs 2,125 from Rs 1,800. Across large-cap IT companies, it raised target prices by 14-18 per cent, while continuing to exercise selectivity in its recommendations.
