Why IT Index Surged to Its One-Month High?

The Nifty IT index staged a sharp comeback on Tuesday, rising more than 3 per cent to touch its highest level in a month. The rally was driven by a combination of strong corporate earnings, healthy order wins and a shift in global investor preference towards traditional IT services companies.

The index closed at 30,418.35, gaining 976.45 points or 3.32 per cent. During the day, it climbed to an Intraday high of 30,664.10. Against its previous close of 29,441.90, the index had surged 4.15 per cent at its peak.

Buying was broad-based, with all 10 constituents of the Nifty IT index ending the session in positive territory. Coforge Ltd led the gains, while Tata Consultancy Services Ltd and Mphasis Ltd also posted strong advances.

Coforge Share Price Leads the Rally

Coforge share price jumped more than 10 per cent after the company reported a strong set of earnings for the June quarter. The numbers were ahead of market expectations, supported by robust revenue growth, margin expansion and a sharp rise in profit.

However, the biggest positive for investors was the company's growing Order Book.

Order Book Continues to Strengthen

The company reported an executable order book of USD 2.23 billion for the next 12 months at the end of Q1 FY27. This was up 27 per cent from the previous quarter and 44 per cent compared with the same period last year.

The company also secured fresh order intake worth USD 691 million during the quarter. It signed four large deals across North America, Europe and Latin America, reflecting healthy client demand despite an uncertain global economic backdrop.

Revenue and Margins Improve

Consolidated revenue rose 49 per cent year-on-year to Rs 5,528 crore during Q1 FY27.

EBITDA increased 74 per cent to Rs 1,123 crore, while the EBITDA margin improved to 20.3 per cent. EBIT more than doubled to Rs 882 crore, taking the EBIT margin to 16 per cent.

Net profit from continuing operations stood at Rs 519 crore, registering a growth of 110 per cent over the corresponding quarter last year.

On a sequential basis, net profit declined 15.3 per cent. The fall was largely due to a higher Tax provision and not because of weakness in the company's core business.

TCS and Mphasis Add to the Momentum

The rally extended beyond Coforge Ltd.

Tata Consultancy Services Ltd share price gained around 4 per cent during the session, supported by strong trading volumes.

Mphasis Ltd share price climbed more than 3.5 per cent after management reaffirmed its growth outlook for FY27.

The company said the September quarter is expected to deliver its strongest sequential constant currency growth in the last three years. It also maintained its FY27 guidance of high single-digit to low double-digit constant currency revenue growth despite continued macroeconomic uncertainty.

Management expects operating margins to remain within the 14.75 per cent to 15.75 per cent range.

For Q1 FY27, Mphasis Ltd reported revenue of USD 471 million, up 2.1 per cent sequentially and 8.3 per cent year-on-year in constant currency terms.

Direct revenue stood at USD 465 million. It grew 2.2 per cent over the previous quarter and 9.9 per cent from a year earlier in constant currency terms, supported by stronger deal conversion and continued demand for the company's AI-led offerings.

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Global AI Selloff Favours Indian IT

Apart from company-specific developments, global market trends also supported the sector.

Technology stocks across South Korea, Japan and Taiwan came under pressure after investors questioned whether the massive investments being made in AI infrastructure would generate adequate returns. The selloff in Semiconductor and AI-related companies prompted investors to rotate towards sectors that offer relatively stable earnings and stronger visibility.

Indian IT companies emerged as one of the key beneficiaries of this shift.

Limited AI Exposure Becomes a Strength

For much of the past year, Indian IT companies were criticised for missing the global AI infrastructure boom.

Unlike global technology giants, Indian IT firms generate most of their revenue from IT services, digital transformation, cloud migration, consulting and enterprise software. They have limited direct exposure to AI chip manufacturing or large-scale AI infrastructure spending.

That distinction is now proving beneficial.

Disclaimer: The article is for informational purposes only and not investment advice.