October saw a pronounced rally across India’s large‑cap information‑technology (IT) universe, pushing the combined market capitalisation of Nifty IT stocks from roughly ₹22.01 lakh crore to ₹25.88 lakh crore – an increase of about ₹3.87 lakh crore. The surge was led by several heavyweight names, with Tata Consultancy Services (TCS) posting the strongest monthly gain of 23 percent. Tech Mahindra, Mphasis, Wipro, Infosys and HCL Technologies also posted double‑digit advances, ranging between 16 percent and 20 percent.
Broad‑based gains across large‑cap IT
The rally was not confined to a single stock. Tech Mahindra climbed 20 percent, while Mphasis and Wipro each rose 19 percent. Infosys added 17 percent to its valuation and HCL Technologies grew 16 percent over the same period. Oracle Financial Services Software was the lone exception, slipping about 5 percent as the rest of the sector marched higher.
These gains lifted the aggregate market value of the Nifty IT index by nearly ₹4 lakh crore, underscoring the breadth of the recovery. The uplift reflects both price appreciation and the relative resilience of IT earnings, even as the broader economy contends with macro‑economic headwinds and the early‑stage impact of artificial‑intelligence (AI) driven deflation.
Foreign portfolio inflows and shareholding shifts
Foreign portfolio investors (FPIs) played a notable role in the rally. National Securities Depository Limited (NSDL) data indicate that FPIs purchased approximately ₹6,463 crore worth of IT equities during the third quarter. The buying was selective, with the share of foreign ownership rising in several key stocks.
Wipro’s foreign holding increased from 8.85 percent in June to 9.46 percent in September, while Infosys saw its foreign stake climb from 27.09 percent to 27.44 percent over the same interval. Oracle Financial Services Software recorded a jump of 173 basis points, reaching an 11.43 percent foreign ownership level. In contrast, Persistent Systems reported no change in foreign participation, and both TCS and Mphasis experienced marginal declines in their foreign‑owned percentages.
Analyst outlook on valuation and growth
Market participants attribute the rally primarily to a price‑to‑earnings (PE) rerating rather than to fresh revenue growth or earnings‑per‑share upgrades. Jefferies analysts Akshat Agarwal and Ayush Bansal note that sentiment around the long‑term growth outlook for Indian IT firms has improved. They point to stable consensus expectations for U.S.‑dollar revenue growth through FY28, which have not been materially revised after the 2QFY27 results—a contrast to the cuts observed after 4QFY26 and 1QFY27. Additionally, they argue that continued delivery of growth despite a weak macro environment and AI‑related price pressures has encouraged investors to reassess terminal growth assumptions.
Jefferies’ internal modelling suggests that current equity prices imply an organic constant‑currency revenue growth range of 0 percent to 9 percent for large‑cap IT firms over FY26‑FY36, and 6 percent to 14 percent for mid‑size players. These implied rates sit roughly 2‑4 percentage points below the growth actually delivered between FY16 and FY26. Within this framework, Infosys and Sagility appear most heavily discounted relative to their historical trajectories, with implied growth about six percentage points lower than past performance. The brokerage sees only Infosys and TCS among large‑cap names as having meaningful upside for further PE rerating, while Sagility stands out among mid‑cap stocks.
HSBC’s assessment paints a more cautious picture. The firm notes that the FTSE India IT index trades at around 18 times forward earnings, below its five‑year average of roughly 23 times. The lower multiple reflects a slowdown in sector earnings growth, which has slipped from a modest 4‑5 percent in recent years to about 2‑3 percent, a decline the bank attributes largely to AI‑induced deflation. HSBC projects FY27 as the most challenging year for the sector, with a tentative recovery in FY28 and FY29 that would only lift growth into the mid‑single‑digit range.
Domestic fund houses echo the tempered tone. Axis Mutual Fund remains underweight on IT services, arguing that AI‑related spending is still concentrated in infrastructure build‑out rather than discretionary technology services. The fund highlights pressure on traditional service lines and suggests that AI may act as a margin and growth overhang before becoming a substantive revenue contributor.
Similarly, PL Capital maintains a 150‑basis‑point underweight stance on the sector. The firm cautions that the industry faces lingering uncertainty over AI’s impact on profitability, and that while large firms are likely to endure, intermittent volatility could persist due to pressures on realisations, growth and margins. PL Capital adds that mid‑cap IT companies might adapt more quickly to the evolving environment and could present better growth prospects, though valuations in many of those names remain demanding.
Collectively, these viewpoints suggest that the market is pricing a selective recovery rather than a sweeping sector‑wide turnaround. Jefferies warns that valuation upside for large‑cap IT firms becomes less compelling beyond earnings multiples of 17‑18 times unless the growth narrative improves markedly.
In summary, the October rally has delivered a sizable lift to the Nifty IT market cap and attracted significant foreign capital, yet analysts remain cautious. The sector’s forward trajectory appears tied to how quickly companies can translate AI developments into sustainable revenue streams and whether earnings growth can rebound to levels that justify higher multiples.
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