IT's time to celebrate when chips are down; Nifty IT soars 11.7% to log biggest weekly rally since 2008

Indian IT stocks staged their biggest weekly rally in 18 years, dating back to the days preceding the collapse of Lehman Brothers, as a secular and precipitous fall in AI-related semiconductor stocks elsewhere in Asia boosted battered legacy outsourcing powerhouses with proven revenue streams and decent operating margins.

Better-than-expected September quarter earnings mirroring Accenture's stellar performance and robust future guidance, steady deal flows, and inexpensive valuations after a spell of prolonged correction drew investors back to the sector that is typically over-owned by overseas funds.

The Nifty IT index surged 11.7% during the week, its biggest gain for the period since April 2008, even as semiconductor-heavy Asian markets tumbled amid concerns over the profitability of massive AI investments.


"The rally is being driven by better-than-expected quarterly results, particularly from HCLTech, improving deal prospects and value buying after a prolonged correction," said Ravi Singh, chief research officer at Master Capital Services.

India's IT services sector is also showing signs of stabilisation after nearly two years of cost-cutting and subdued growth. Growth averaged 2-2.5% quarter-on-quarter, while rupee-reported revenue rose 11-15% year-on-year. TCS onboarded 24,000 freshers in the first half of the year, while HCLTech added 6,450 employees during the quarter.

The technology index jumped 3.9% to close at 31,924 on Friday, its highest level since February 22.

To be sure, even after the latest surge, the index has retreated 16% year-to-date. The Nifty gained 2.8% during the week.

Hedging the Bets

The rally added ₹2.8 lakh crore to the combined market capitalisation of Nifty IT constituents, which collectively made up 7.52% of the Nifty by weighting at the end of the September quarter.

Before Indian technology firms began announcing their earnings, Accenture logged the biggest daily gains ever in its stock earlier this month after both last-year performance and next-year guidance beat analysts' expectations. Accenture, the world's biggest technology outsourcing company by market value, is often seen as a proxy for the revenue and profitability outlook in Indian IT.

Legacy technology stocks are increasingly being seen as a hedge against the AI trade, the hottest investment theme in recent times. The sector has been in a bear grip as growing investments in AI are seen as a threat to its prospects.

South Korea's Kospi plunged nearly 14.5% during the week, its biggest weekly loss since October 2008, while Japan's Nikkei 225 and Taiwan's stock market fell nearly 5% each. South Korea and Taiwan, known for their semiconductor capabilities, have emerged as major investment destinations for global investors seeking exposure to the AI boom in 2026. Among IT stocks, Tech Mahindra led the gains, surging 18% during the week, followed by TCS and Infosys, which rose 14% each. Wipro and HCLTech gained 13.5% each, while LTIMindtree and Mphasis advanced 8% and 6%, respectively.

AI is also contributing to revenue. TCS reported annualised AI revenue of $3.1 billion, accounting for more than 10% of its total revenue, while HCLTech's advanced AI business grew 78% YoY.

"The sector is being reset," said Manish Bhandari, founder, CEO and portfolio manager at Vallum Capital. "Indian IT companies are adapting their services and business models to AI."

Fixed-price and outcome-based contracts are also gaining ground over time-and-materials billing, potentially supporting margins by linking revenue to results rather than employee numbers, Bhandari said. Banking and financial services remains the strongest business vertical, while the UK and Europe are improving and North America remains uneven.