Tech Mahindra, Wipro: NIFTY IT index outperforms in last one month, here are key reasons behind the rally in shares

The information technology (IT) shares have outperformed their peers in the NIFTY50 index in the last one month as the measure of IT stocks on the National Stock Exchange – the NIFTY IT index – has advanced 4.36% compared with a 1.35% gain in the benchmark NIFTY50 index.

In intraday deals on Monday, NIFTY IT index jumped as much as 1.81% or 669 points to hit high of 37,554.35. Seven out of 10 shares in the index were trading higher led by Tech Mahindra's 2.22% gain. Persistent Systems, Wipro, HCL Technologies, Mphasis, Coforge and Infosys also rose 0.25%-1.2%.

The renewed momentum in Indian IT stocks comes after nearly a year of underperformance and is being driven by multiple macro and sector-specific tailwinds.

Rupee weakness and hopes of change in H-1B visa stance spur buying

A depreciating rupee against the US dollar—beneficial for export-driven IT companies—has been a major catalyst behind the rally. Last week, the rupee plunged 98 paise to close at its lifetime low of 89.66 against the US dollar on Friday, due to a huge demand for the greenback in the domestic forex market amid widespread selling pressure in local and global equities and trade-related uncertainties.

Additionally, improved sentiment around US–India trade relations and softening commentary from US President Donald Trump on H-1B visa restrictions has boosted optimism.

Trump, who previously imposed steep restrictions, including a one-time $1,00,000 fee on H-1B visas, suggested in a recent interview that the US lacks specialised talent in key sectors and acknowledged the economic need for skilled foreign workers.

“You don’t have certain talents, and people have to learn,” Trump said in a Fox News interview, signalling a shift from earlier hardline immigration stances. Industry voices, including startup leaders, have warned that visa restrictions could slow innovation and disproportionately hurt smaller technology companies.

Maturing AI cycle

Analysts indicate that the global artificial intelligence (AI) infrastructure buildout cycle may be approaching maturity. With hyperscalers seeing diminishing returns on foundational AI investments, the next growth cycle is expected to shift toward application and services layers—a domain where Indian IT firms hold a strategic advantage.

The transition is expected to gain momentum by mid-2026, potentially unlocking new enterprise spending on generative AI solutions.

Attractive valuations

Despite the recent uptick, Indian IT stocks have lagged broader indices over the past three years, with the NIFTY IT index delivering a compound annual growth rate (CAGR) of just 8%, compared with 13% for the NIFTY50 and 16% for the NIFTY500. This divergence leaves room for re-rating, according to analysts at Motilal Oswal.

IT services firms currently contribute 15% of NIFTY's aggregate profits, while their weight in the benchmark index has dropped to a decade-low of 10%, down sharply from 19% in December 2021.

A report from Goldman Sachs signals early signs of demand stabilisation, with the sector reporting 1.5% sequential revenue growth in the latest quarter. Analysts expect this trend to continue into the December quarter, forecasting a 1.7% sequential rise in services revenue.

However, the broader outlook remains muted. For FY26, IT revenue is expected to grow just 1.1% year-on-year, improving modestly to 5.4% in FY27 as global client spending remains subdued and AI-driven productivity gains continue to compress traditional revenue lines.