Cyient, TCS, Infosys: IT stocks power ahead as NIFTY IT surges 16% in a month — what’s driving the rally?

IT services stocks stood out in Friday’s trade on October 23, with the sector witnessing strong buying interest after Cyient reported encouraging Q2 FY27 results on Thursday and ahead of Infosys’ September-quarter earnings, due later in the day. Coforge and Mastek are also scheduled to announce their Q2 FY27 results today.

IT stocks, which witnessed heavy selling pressure and turned out of investors’ favour, have made a sharp comeback and how!

How IT stocks were performing on Oct 23

The NIFTY IT index surged as much as 3.29% to hit an intraday high of 33,138.60 in early trade on Friday, October 23, before paring some gains. At 9:46 am, the index was trading 1.82% higher at 32,665.40, with nine of its 10 constituents in positive territory.

Taking Friday’s intraday high into account, the index has rallied around 16% over the past month, reflecting renewed buying interest in IT stocks.

Why are Indian IT stocks rallying? 6 key factors driving the surge

The NIFTY IT index has rallied around 16% in October so far, supported by better-than-expected September-quarter earnings from major IT companies, healthy deal wins and improving management commentary.

The rally has also coincided with a sell-off in global AI-linked stocks, prompting investors to reassess the relative attractiveness of Indian IT services companies after their earlier correction.

Better-than-expected earnings from IT majors

Tech Mahindra’s net profit rose 32.7% YoY to ₹1,586 crore, while HCLTech reported a 21.2% increase in net profit to ₹5,132 crore. Tata Elxsi’s performance was more mixed, with revenue improving sequentially but net profit remaining broadly flat year-on-year.

Strong deal wins offer revenue visibility

Healthy deal bookings have strengthened expectations of future revenue conversion. HCLTech reported record new deal bookings of $3.3 billion in Q2 FY27, up 27% YoY, while Tech Mahindra’s new deal wins rose 25.4% to $1.02 billion.

TCS reported total contract value (TCV) of $9.6 billion, including a five-year strategic partnership with Porsche AG and an agreement involving Best Buy’s global capability centre in India. These wins suggest that clients continue to spend on technology transformation, although converting contracts into revenue can take time.

Management commentary points to improving business momentum

Commentary from some of the leading IT companies has been encouraging, particularly on deal pipelines, AI-led opportunities and growth prospects. HCLTech raised the lower end of its FY27 revenue growth guidance to 2.5%, from 1% earlier, while retaining the upper end at 4%.

Global AI-stock sell-off is prompting a shift in investor preference

The correction in global AI-linked technology stocks, amid concerns over elevated valuations, heavy capital expenditure and the returns on AI investments, has created a contrasting investment narrative.

Some investors appear to be rotating towards Indian IT services companies, which can benefit from enterprise spending on AI implementation, software modernisation and integration.

This has supported the so-called “anti-AI trade” in Indian IT stocks. However, the shift does not mean AI is a threat-free opportunity for Indian IT firms: automation could also disrupt traditional billing models and put pressure on pricing.

AI is emerging as a new revenue opportunity

Rather than viewing AI only as a competitive threat, investors are increasingly tracking how Indian IT companies can monetise it through consulting, implementation, cloud infrastructure, software engineering and enterprise automation.

TCS’s annualised AI revenue crossed $3.1 billion in Q2 FY27, while HCLTech’s annualised advanced AI revenue reached $876 million, up 78% YoY in constant currency terms. These numbers offer evidence of growing AI-related business, although the contribution to overall growth and profitability will be important to watch.

Earlier correction has created room for a rebound

Before the October rally, the NIFTY IT index had fallen sharply from its February 2026 peak, touching a 52-week low in July. The subsequent recovery has partly reflected bargain-hunting and a reassessment of valuations after the sell-off, alongside improving earnings signals.

However, after a rally of around 16% in October, the valuation comfort may have narrowed. Investors will now look for sustained revenue growth, deal conversion and earnings upgrades to justify further gains.

What investors should watch next

Infosys’ Q2 FY27 results and management commentary on October 23, followed by the sector’s ability to sustain deal momentum, convert AI opportunities into meaningful revenue, and protect margins.