Infosys, TCS, HCLTech jump up to 4%. 3 reasons why IT stocks are rallying today?

IT stocks extended gains for a third straight session, led by Infosys, TCS, HCL Technologies and Tech Mahindra. The rally reflects stronger global tech sentiment, AI spending optimism, rate-cut hopes and support from a weaker rupee.

In Short

• IT stocks rally for third day, led by Infosys and TCS gains
• Rally driven by strong US cloud software results and AI optimism
• US rate cut hopes and weak rupee support IT sector momentum

IT stocks extended their rally for a third straight session on Monday, with Infosys, Tata Consultancy Services (TCS), HCL Technologies and Tech Mahindra emerging among the top gainers on the Sensex as investors rushed back into a sector that has been one of the market's biggest laggards this year.

The Nifty IT index climbed 2.8% to 30,680.75, taking its gains over the last three trading sessions to 5.8%. Infosys led the rally among frontline technology stocks, rising 4.42%, while TCS gained 3.52%. HCL Technologies advanced 2.33% and Tech Mahindra rose 1.70%.

The gains were broad-based across the sector. Coforge climbed 2.18%, LTIMindtree gained 2.74%, Mphasis rose 2.77% and Persistent Systems added 1.68%. Wipro also traded higher.

The strength in technology stocks provided crucial support to the broader market. Infosys, TCS, HCL Technologies and Tech Mahindra featured among the top gainers on the Sensex, helping offset weakness in several banking, industrial and consumer stocks.

WHY ARE IT STOCKS RALLYING?

The latest rally has been driven by a mix of improving global sentiment, optimism around artificial intelligence spending, expectations of lower US interest rates and the benefit of a weaker rupee.

The immediate trigger came from the United States, where cloud software company Snowflake reported stronger-than-expected results and issued encouraging commentary on demand trends. The results reassured investors that spending on software, cloud services and artificial intelligence remains healthy despite concerns over slowing global growth.

For Indian IT companies, this is important because a large part of their business comes from overseas clients, particularly in North America. Strong demand signals from global software firms are often viewed as an indicator that technology budgets remain intact and that outsourcing demand could improve in the coming quarters.

The Snowflake results also reinforced a broader market belief that the AI boom is moving beyond hype and beginning to translate into actual spending by enterprises. Investors increasingly expect Indian technology companies to benefit from the next wave of AI-related investments, whether through software development, cloud migration, data management or digital transformation projects.

US RATE CUT HOPES ADD TO THE MOMENTUM

Another factor supporting the sector is growing optimism that the US Federal Reserve could begin cutting interest rates later this year.

Technology stocks tend to perform well when interest rates are expected to fall because lower borrowing costs increase the present value of future earnings. This has already triggered a strong rally in US technology shares, particularly those linked to artificial intelligence.

As global investors increase exposure to technology stocks, some of that positive sentiment has spilled over to Indian IT companies.

WEAK RUPEE IS A POSITIVE

The recent weakness in the rupee is also working in favour of the sector.

Most large Indian IT companies earn a significant portion of their revenue in US dollars. When the rupee weakens against the dollar, overseas earnings translate into higher rupee revenue, supporting margins and profitability.

The rupee recently touched record lows against the US dollar before staging a partial recovery. Even so, the currency remains relatively weak, which is generally viewed as beneficial for export-oriented sectors such as information technology.

VALUATIONS HAVE BECOME ATTRACTIVE

The sector's sharp correction over the past year has also made valuations more appealing.

IT stocks had come under pressure due to muted earnings growth, slower client spending and fears that artificial intelligence could disrupt traditional outsourcing models. The concerns triggered a prolonged sell-off that left many large-cap technology stocks trading well below their previous highs.

Even after the recent rally, the Nifty IT index remains down about 19% in 2026 so far, highlighting the extent of the correction the sector has witnessed. The recent rebound therefore reflects investors taking advantage of attractive valuations as sentiment improves.

Market participants say the sustainability of the rally will depend on whether global AI spending continues to accelerate, whether the US Federal Reserve begins easing rates and whether Indian IT companies can show stronger earnings growth in coming quarters.

For now, investors appear willing to look beyond recent concerns and focus on the possibility that the worst may be over for the sector. With AI spending remaining strong, valuations looking more reasonable and currency trends supportive, technology stocks are once again finding favour with investors.

(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)

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