The Indian information technology sector experienced another strong trading session on Wednesday, with heavyweight companies such as Infosys, Tata Consultancy
Services (TCS), HCLTech, Wipro, Tech Mahindra and Coforge extending their gains. The rally came as global investors continued to reduce exposure to semiconductor and artificial intelligence-linked stocks amid growing concerns over the enormous spending by technology giants on AI infrastructure. At around midday, TCS climbed 3.2 per cent to Rs 2,476 on the BSE, while Infosys advanced 4.1 per cent to Rs 1,152. HCLTech added 2.3 per cent to Rs 1,350, and Wipro gained 2.2 per cent to Rs 185. Among mid-cap IT names, Coforge emerged as the top performer with another 5 per cent jump after reporting a strong first-quarter performance, while Persistent Systems rose more than 3 per cent. The rally comes despite persistent concerns surrounding the Indian IT industry, including slower discretionary technology spending, pricing pressure from clients, rising employee costs and uncertainty over how artificial intelligence could reshape traditional outsourcing revenues. Global AI Trade Faces Fresh Scrutiny The recent weakness in global technology stocks reflects a noticeable change in investor sentiment toward companies that have been leading the AI boom. “The AI trade is being viewed with a much greater degree of scepticism, and the shift in sentiment means it has become something of a one-way trade, with stocks being sold unmercifully,” Mark Luschini, chief investment strategist at Janney Montgomery Scott, told Bloomberg. The pullback in the Nasdaq 100 has highlighted increasing investor concerns about whether the billions of dollars being poured into AI infrastructure will generate meaningful returns anytime soon. As expectations become more demanding, investors have started reassessing the lofty valuations of technology companies that have benefited from the AI rally. China has also added another layer of uncertainty. ChangXin Memory Technologies (CXMT) made a spectacular stock market debut with shares soaring nearly 500 per cent. At the same time, reports suggested that a Chinese state-backed company has started manufacturing immersion DUV lithography equipment, signalling potential progress in China's semiconductor ambitions. "The market's concern lies less in CXMT's current earnings and more in its potential for accelerated capacity expansion to rival Korean companies, as well as its technology development following the IPO," Kim Seok-hwan, a Seoul-based market analyst at Mirae Asset Securities, told Reuters. Jefferies Sees Tactical Opportunity In Indian IT While global AI-related concerns continue to weigh on sentiment, international brokerage Jefferies believes the sharp correction in Indian IT stocks could offer an opportunity for investors. Following discussions with more than 50 foreign portfolio investors (FPIs), the brokerage said sentiment toward India has improved as worries around the AI trade have intensified globally. It also noted that foreign investment flows have turned positive, while both economic indicators and corporate earnings have been stronger than anticipated. According to Jefferies, Indian IT services companies have already absorbed much of the negative sentiment surrounding AI. The brokerage has therefore ended its long-standing underweight position on the sector by adding Infosys to its portfolio while increasing exposure to Coforge, taking its overall allocation to the sector to neutral. The IT index has fallen around 25 per cent so far this year. India's four largest IT firms, TCS, Infosys, HCLTech and Wipro, continue to trade roughly 35 per cent to 50 per cent below their highs recorded over the past two years. Although revenue growth is expected to remain in the low-to-mid single digits between FY26 and FY28, Jefferies believes that any easing of AI-related concerns could support a tactical rebound following the steep correction. The brokerage also observed that markets are reacting less sharply to negative sector-specific news, suggesting that selling pressure may be approaching exhaustion. US Fed Decision Remains Key Trigger Investors are also closely watching the outcome of the US Federal Reserve's policy meeting, which could shape the near-term outlook for Indian IT stocks. While the central bank is widely expected to leave interest rates unchanged, CME FedWatch data indicates that expectations for a future rate increase have strengthened. Markets are currently pricing an 81 per cent probability of a rate hike at the Fed's September meeting. The Federal Reserve's policy direction remains important for India's technology exporters because higher US interest rates can curb corporate technology spending, while lower borrowing costs typically encourage business investment. Additionally, movements in the US dollar influence earnings for Indian IT companies, as a stronger dollar increases the rupee value of revenue generated from overseas markets.
