Technology stocks witnessed fresh buying on Monday, 25 May, building on the gains witnessed last week as investors resorted to lower-level buying and amid shifting sectoral preferences due to a weakening Indian rupee.
The Nifty IT index gained almost 1% to rise to the day’s high of ₹29,177.80 apiece, with all index constituents in the green. The IT pack rose 4.31% last week, though it remains flat with a negative bias for the month so far.
Oracle Financial Services Software (OFSS) was the top gainer in the index as it rose over 3% to ₹9,834 apiece on the NSE. It was followed by Wipro, which traded over 2% higher following the announcement of its buyback record date last week on Friday.
Meanwhile, Mphasis, Persistent Systems, Tech Mahindra, Coforge and TCS traded 1-2% in the green. HCL Technologies, Infosys and LTIMindtree also rose but less than 1% each.
Why are IT stocks rebounding?
The rebound in IT stocks can be attributed to the sharp depreciation in the Indian rupee and value buying after heavy selling in the first quarter of the calendar year. A stronger dollar raises expectations of better profit growth for companies that earn a large share of revenue in the greenback.
Additionally, analysts believe that IT stocks have already corrected significantly, and dividend yields are attractive at these levels for companies like TCS and others.
However, despite this rise, the Nifty IT index remains the worst-performing sector on NSE. The index has lost over 22% so far this year amid fears of AI-led disruption for the labour-intensive Indian IT services sector.
Should you buy IT stocks?
Prominent market investors continue to find opportunities in IT even as broader sentiment towards the sector remains cautious.
Naren described the current setup as a “contrarian valuation call”, while acknowledging that the industry still faces genuine disruption risks from AI.
Sankaran Naren of ICICI Prudential AMC, at the Groww India Investor Festival 2026 in Mumbai earlier this month, described the current setup as a “contrarian valuation call”, while acknowledging that the industry still faces genuine disruption risks from AI.
“It is a contrarian valuation call. But whether it is a value trap, that is not clear,” he said.
Naren also argued that if AI-led disruption becomes as severe as some fear, its impact would likely extend beyond IT services alone. “If AI is truly disruptive, several sectors will get disrupted. But the market is selectively punishing IT,” he suggested, adding that mutual fund allocations to the sector remain unusually low.
Rajeev Thakkar of PPFAS Mutual Fund pointed out that Indian IT companies have repeatedly survived existential concerns over the past three decades. Top three Indian stocks remained among his top picks in the month of April.
“In the late 1990s, people thought these companies were only about Y2K. Then came the dotcom crash. Later during the SaaS wave, people questioned why clients would even need IT services companies,” he said.
According to Thakkar, the industry has historically adapted to technological change rather than being displaced by it.
“People are now saying this time it is different, that AI is replacing developer work and there may not be enough work to go around,” he said.
However, he argued that productivity gains from AI may ultimately expand demand rather than shrink it. Drawing parallels with industries such as telecom and discount broking, Thakkar referred to the economic principle known as Jevons’ Paradox — where lower costs can lead to higher overall consumption.
Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
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