AI Revival Boosts Indian IT Stocks: Nifty IT Index Surges 8% in Three Days Amid Easing Demand Concerns

Indian IT Stocks Stage Sharp Comeback as AI Boom Reassures Investors

The Indian information technology sector has staged a sharp comeback over the past three trading sessions, with the Nifty IT index surging nearly 8 percent as investors bet that the artificial intelligence (AI) boom could prove to be an opportunity rather than a threat for software companies and IT services providers.

The Nifty IT index rose 4.2 percent on Tuesday to end at 31,116.6, taking its gains over three sessions to 7.6 percent. The sector has significantly outperformed the broader market during this period, emerging as the top-performing sectoral index while most other sectors have delivered muted returns. Infosys has been a key driver of this rally, climbing 9.6 percent over three sessions, while TCS has gained 8.3 percent in just two days.

The rally has been broad-based, with shares of Hexaware Technologies, LTIMindtree, Mphasis, KPIT Technologies, Tata Elxsi, Coforge, and Persistent Systems all rallying sharply in recent sessions. Several IT names dominated the list of top midcap gainers on Tuesday and Wednesday.

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The latest rally marks a significant shift in investor sentiment towards the sector, which remains down roughly 20-25 percent in 2026 despite the recent recovery. Analysts say the move is being driven by a global rotation back into software stocks after a prolonged period of underperformance and concerns that AI could disrupt traditional software business models.

A recent set of strong quarterly results from major software-as-a-service (SaaS) companies in the United States has reassured investors that AI adoption is not hurting software demand. Instead, the technology is increasingly creating new spending opportunities across cloud computing, data management, product engineering, and enterprise software.

The strong results have been led by companies such as Snowflake, which raised its growth guidance to 31 percent from 27 percent previously, while ServiceNow increased its outlook to 22-25 percent growth from 20.5-21 percent. SAP maintained its 12-13 percent constant-currency growth guidance, while Salesforce also reiterated its growth outlook.

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The implications are particularly significant for Indian IT companies because many have deep partnerships with global software firms. Infosys works closely with SAP, LTIMindtree has a significant relationship with ServiceNow, while companies such as Persistent Systems and Birlasoft have partnerships with Snowflake. CLSA estimates that SaaS-related work could account for anywhere between 10 percent and 25 percent of revenues for some Indian IT firms.

A weaker rupee has also added to the positive sentiment, potentially boosting earnings for export-oriented IT companies. The sector has also received support from a broader rally in global technology shares, with US software stocks surging overnight, helping lift the software services index by more than 4 percent. Investor sentiment has further improved after Nvidia highlighted the growing importance of software in enabling AI adoption and unveiled new products aimed at expanding AI capabilities beyond data centres.