Nifty IT rises after sharp fall; Infosys, Coforge, TCS jump over 2% — Is worst over for IT stocks? Brokerages weigh in

Shares of IT companies rebounded on Tuesday, with the Nifty IT index rising after a recent sharp correction, even as brokerages remained divided on the medium- to long-term outlook amid artificial intelligence (AI)-led disruption concerns.

The Nifty IT index was trading at 33,378.30, up 640.25 points or 1.96 per cent. Among frontline stocks, Infosys rose 2.52 per cent to Rs 1,400.00 after announcing a strategic collaboration with Anthropic to develop enterprise AI solutions across telecommunications, financial services, manufacturing and software development.

Meanwhile, Coforge gained 2.49 per cent to Rs 1,427.20. HCL Technologies advanced 1.52 per cent to Rs 1,484.00, and Tata Consultancy Services added 1.52 per cent to Rs 2,747.70.

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Among other constituents, Persistent Systems climbed 1.49 per cent to Rs 5,665.00, Mphasis rose 1.34 per cent to Rs 2,494.50, and Tech Mahindra gained 1.29 per cent to Rs 1,532.20.

Oracle Financial Services Software ended 1.16 per cent higher at Rs 6,777.00, while LTIMindtree rose 0.91 per cent to Rs 5,165.00. Wipro was up 0.28 per cent at Rs 213.86.

The rebound comes after sustained selling pressure in recent weeks on concerns that rapid advances in AI could disrupt traditional IT services models.

Nomura sees overreaction, prefers select names

Brokerage firm Nomura said concerns around AI-driven obsolescence are “oversimplifying the role of IT services companies”.

It said replacing SaaS products and IT vendors with new applications is easier said than done. According to the brokerage, adoption of newer and unproven technologies remains slow due to compliance, regulatory, business continuity and operational risks.

Nomura noted that SaaS firms have built strong moats around data, compliance infrastructure, domain expertise and support systems. It added that IT services companies have historically adapted to technological shifts.

The brokerage said revenue models may gradually move from fixed-price and effort-based structures to outcome-driven models over time. It added that margin protection will depend on how aggressively companies deploy automation internally.

Nomura said the recent sell-off in IT services stocks appears to be a case of “front-loading of pains”. It prefers Infosys among large caps, Coforge among mid-caps and eClerx among small caps.

UBS flags structural shift but sees near-term improvement

UBS said investor concerns around long-term terminal value have intensified following recent developments linked to Anthropic and Palantir.

The brokerage said markets are worried that rapid advances in agentic AI could structurally weaken traditional IT services models. It added that current valuations suggest investors are now pricing in terminal free cash flow growth of 4–6 per cent compared with 6–7 per cent a month ago.

UBS said structural evolution in business models will be key. It also believes there has been some near-term overreaction. The brokerage said the demand environment is improving in the near to medium term, but it will closely monitor how effectively IT services companies adapt to structural changes.

Citi remains cautious on spending and competition

Citi maintained a cautious stance on the sector. It said concerns around AI and lightening up of domestic institutional investor positions could result in some valuation gap compression.

The brokerage expects higher volumes in the sector but said the key debate remains how much work will be executed by machines and how value capture will be distributed.

Citi flagged risks including an uncertain spending environment, rapid technology changes, high competitive intensity, fragmentation, faster growth of global capability centres and the impact of AI. It said Infosys and HCL are relatively preferred among large-cap names under its coverage.

Nifty IT Movement

Despite the recovery, the index remains significantly below its 52-week high of 40,905.40. At the current level, it is down 7,527.10 points or about 18.40 per cent from the peak.

The index has declined 6.90 per cent over the past week and 14.91 per cent in the last month. It is down 8.57 per cent in three months and 4.53 per cent in six months. On a year-to-date basis, it has fallen 12.87 per cent and is lower by 19.03 per cent over one year. However, it has gained 7.09 per cent over three years and 31.54 per cent over five years.