Indian IT stocks rally on Tech Mahindra earnings, HCL AI deal
A broad rally in Indian IT equities, led by an upbeat earnings report from Tech Mahindra and a major AI-focused contract win for HCL Tech, signals a potential turning point for a sector battling weak discretionary spending.
The Nifty IT index climbed 2.3%, or 658 points, to 29,381 as investors responded to concrete signs of revenue acceleration and AI monetization. Tech Mahindra rose 3.4% to Rs 1,563 and HCL Tech gained 3% to Rs 1,221. Infosys added 3.3% to Rs 1,117, while TCS touched an intraday high of Rs 2,256.
Tech Mahindra anchored the sector's move after reporting first-quarter results that comfortably exceeded brokerage forecasts. Constant currency revenue grew roughly 3% sequentially to $1,660 million, sharply outpacing Nomura’s 1% estimate. EBIT margins hit 14.4%, driven by currency depreciation and its ongoing Project Fortius initiative, compared to the 14.1% forecast.
The performance prompted Nuvama to upgrade its FY27 and FY28 earnings estimates while Nomura lifted its target price to Rs 1,800. “TechM delivered a strong start to FY27 with broad-based growth, continued margin expansion and robust deal-wins, setting the stage for the final phase of its transformational journey,” Nuvama noted. Motilal Oswal argued the quarter signals a jump in growth expectations from roughly 3-5% to 6-7% over the next two years, adding that sustained momentum could warrant a re-rating.
Separately, HCL Tech secured a seven-year agreement with Guardian Life Insurance Company of America to accelerate AI-led modernization across the insurer's operations. The contract reinforces the thesis that Indian IT providers are successfully pivoting from traditional outsourcing to developing proprietary AI solutions. This shift is critical for maintaining pricing power amid broader sector headwinds.
The rally was not uniform, exposing the divergent fundamentals within the sector. Wipro dropped more than 3% after reporting a 1.2% sequential decline in constant currency revenue and a 16% EBIT margin that missed estimates. Both Nomura and Nuvama cut their price targets on the stock, citing muted growth following a 1.6% revenue decline in the previous fiscal year.
For market participants, the session underscores a growing dispersion in Indian IT valuations. The industry continues to face structural pressure from wage inflation and weak discretionary budgets. However, companies demonstrating clear AI integration and operational leverage are successfully separating themselves from laggards in the current environment.
