NIFTY IT surrenders intraday highs to close 2% higher; What to charts say

IT stocks were among the top gainers in Tuesday's trading session as sectoral tailwinds boosted sentiment for IT stocks. The NIFTY IT index surged as much as 5% in the intraday session on Tuesday, hitting an intraday high of 30,435. The rally boosted the gains in the benchmark NIFTY50, which nearly touched the 23,600 mark on the weekly expiry day. However, IT stocks led the early morning gains in the benchmark NIFTY50 index. However, in the afternoon session, profit booking from intraday high levels erased the intraday gains in the IT stocks, leaving over 2% gains in the NIFTY IT index.

However, the index closed 2.2% higher, paring its partial gains on Tuesday. Here is what the NIFTY IT index chart shows after today’s rally.

Slowing the pace of AI advancement

The IT stocks received strong investor optimism after Dario Amodei’s essay on slowing the advancement in AI models, which secured recognition from other AI leaders like Sam Altman and Elon Musk. The move was seen as critical after the whistleblower, engineers alarmed that AI could kill humans in a period of less than a decade. The development was seen as a tailwind for the IT sector, as it continues to struggle with the advancement of AI amid repricing in traditional software business models. If AI companies aim to slow down on advanced models, investors feel it will reprice the threat of AI on the IT sector.

Rupee depreciation

After stabilising around the ₹95 per dollar mark, the rupee depreciated +0.41 points on Tuesday and inched closer to the ₹96 per dollar mark. The depreciation is seen as a positive trigger for IT stocks, which derive the majority of their revenue in a global currency. The positive sentiment led to strong buying in the IT major stocks like HCL Technologies, Wipro, TCS, Infosys and Tech Mahindra, which rallied as much as 6% on Tuesday.

Affordability

The magnitude of today’s rally was also driven by valuation factors as the IT stocks trade near multi-year low valuations after the recent corrections. The NIFTY IT index traded at an 18x price-to-earnings ratio, significantly lower than the five-year median PE of 27x. Similarly, IT majors like HCL Technologies, Infosys, TCS, Tech Mahindra and Wipro trade at 3a 0% to 50% discount to their five-year median price-to-earnings ratio. Coupled with easing headwinds and affordable valuations, the NIFTY IT index saw a sharp rally of over 5% on Tuesday.

Do charts indicate a reversal?

The NIFTY IT index daily chart shows a strong gap-up opening in the early morning session, which later fizzled out, creating a shooting star candlestick pattern, indicating poor strength in today’s rally. In addition, even after a 2% rally, the index failed to close above the 20 and 50 EMA levels, indicating sustained bearish momentum in the IT sector. Going forward, the June 2026 lows remain a crucial support for the index.