The rally comes amid growing expectations that the US Federal Reserve could cut interest rates later this year.

Infosys, Tech Mahindra, TCS jump up to 5%; why are IT stocks rallying today?

US rate-cut expectations and hopes of a rebound in technology spending are driving fresh interest in IT stocks, helping the sector outperform the broader market after months of lagging.

by · India Today

In Short

  • Nifty IT jumps nearly 4%, leads sectoral gains
  • Infosys, Tech Mahindra rise over 4.5%
  • Fed rate-cut hopes boost technology sector sentiment

Information Technology (IT) stocks extended their gains on Monday afternoon, with the Nifty IT index surging nearly 4% as investors piled into the sector on hopes of lower US interest rates and a recovery in technology spending.

At around 12:22 pm, the Nifty IT index was trading 3.86% higher at 30,203.80, making it the best-performing sectoral index on Dalal Street.

Among frontline stocks, Infosys rose 4.62% to Rs 1,214.50, while Tech Mahindra gained 4.69% to Rs 1,553.50. TCS advanced 3.26% to Rs 2,332.60. Wipro and HCLTech also traded in the green, rising 1.25% and 2.21%, respectively.

The rally was even stronger among mid-cap IT companies. Persistent Systems jumped 5.43%, Coforge climbed 5.15%, LTIMindtree gained 4.80% and Mphasis rose 4.24%.

The sharp upmove comes amid growing expectations that the US Federal Reserve could begin cutting interest rates later this year. Lower borrowing costs generally encourage businesses to increase spending on technology, cloud infrastructure, digital transformation and artificial intelligence projects — key revenue streams for Indian IT firms.

Since a large portion of the Indian IT industry's revenue comes from North America, any improvement in the outlook for the US economy tends to boost investor sentiment towards the sector.

Investors are also returning to IT stocks after a prolonged period of underperformance. While broader markets have touched fresh highs in recent months, many technology stocks have lagged due to concerns over weak discretionary spending by global clients and delayed decision-making on large projects.

Recent management commentary from several IT companies has indicated that demand conditions may be stabilising. Companies have also pointed to growing interest in AI-led transformation projects, which investors expect to become a major growth driver over the next few years.

Despite Monday's rally, most large-cap IT stocks continue to trade well below their 52-week highs. Infosys remains far from its peak of Rs 1,728, while TCS is still significantly below its 52-week high of Rs 3,538.

The combination of attractive valuations, expectations of Fed rate cuts and hopes of improving client spending has triggered fresh buying in the sector, helping IT stocks emerge as the market's biggest winners on Monday.

- Ends