IT Stocks Defy Market Downturn Ahead of Q4 Earnings Season

IT Stocks Shine on Dalal Street as Nifty IT Index Rises 1%

On Monday, April 6, the Indian IT sector stood out as one of the few pockets of strength on Dalal Street, despite the broader market remaining under pressure. The Nifty IT index rose more than 1%, extending its winning streak to a third straight session and taking its cumulative gain during this period to around 6%. This move higher comes at a critical juncture for the sector, with the Q4FY26 earnings season set to begin next week. Investor focus has now firmly shifted to upcoming results from heavyweights such as Tata Consultancy Services (TCS), Infosys, and other frontline IT firms.

Among individual stocks, Coforge, Wipro, Tech Mahindra, Persistent Systems, and Infosys advanced 1-2%. HCL Tech, L&T Technology Services, and Tata Consultancy Services (TCS) also traded with gains. On the other hand, Mphasis and LTIMindtree remained under pressure and were down around 0.5% each. The latest rebound signals a tentative recovery for the index after a weak run in recent months, having declined 5% in March and tumbled 19.5% in February amid concerns over AI-driven disruption and demand uncertainty.

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The relative outperformance in IT stocks today came even as the benchmark indices witnessed sharp intraday losses amid concerns surrounding the prolonged US-Iran war. The Sensex and Nifty 50 both traded more than 0.5% lower during the session. At its lowest point in the day, the Sensex had fallen 591 points, or 0.8%, to 72,728.66, while the Nifty 50 dropped 170 points, or 0.75%, to an intraday low of 22,542.95.

The upcoming earnings season is expected to be closely watched, particularly for signs of demand recovery and management commentary on the business outlook. According to a report by Kotak Institutional Equities, the Indian IT pack is expected to post a subdued set of numbers for the March quarter, although the year-on-year (YoY) growth trend is likely to remain stable to slightly better for several companies.

Revenue growth for most IT companies is likely to remain modest in Q4FY26, but the YoY profile could improve for a number of players. Within verticals, financial services is expected to emerge as the key sequential growth driver. The sharp depreciation of the rupee against the US dollar is likely to support double-digit earnings growth for several IT firms.

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Beyond quarterly earnings, management commentary and FY27 guidance will be critical for the sector. Outlook statements are likely to reflect the impact of heightened geopolitical uncertainty due to the US-Iran war, along with the growing pressure of revenue deflation arising from GenAI-led programmes. Kotak Equities' preferred stock picks in the sector are Tech Mahindra, TCS, Infosys, and Coforge.