Shares of information technology companies, including TCS, HCLTech, Infosys and Wipro, have rallied up to 12% over three sessions. The rebound follows a selloff in AI-linked stocks across Asian and US markets, which raised concerns over stretched valuations, concentration risks and the time required for heavy investments in artificial intelligence to generate returns.
The Nifty IT index has gained 8% over the past three sessions, adding Rs 82,500 crore to the sector’s market capitalisation. HCLTech led the gains, rising 12%, followed by TCS at 11% and Tech Mahindra at 10.60%. Infosys and Wipro advanced 9% and 7%, respectively.
AI selloff triggered - Asian markets opened lower on Thursday after US consumer inflation rose faster than expected, strengthening expectations that the Federal Reserve could take action later this year and weighing on global equities.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.2%, led by a 5.6% slump in South Korea’s KOSPI. Japan’s Nikkei 225 declined 1.3%, while S&P 500 e-mini futures slipped 0.3%.
Overnight, Wall Street ended lower on Wednesday, with losses in artificial intelligence stocks weighing on the broader market as investors digested hotter-than-expected US consumer inflation data for September.
Accenture allays AI fears - At investor day, Accenture’s Chief Executive Officer Julie Sweet pushed to dispel fears that new technology poses a major threat to the consulting industry.
“The opportunity is bigger than ever before,” she said. “While AI does have the potential, with AI efficiencies, to impact our business more than ever before, we again believe that ultimately, the new demand that will be created, will far exceed the demand that’s being replaced.” Accenture's commentary is closely watched as an indicator of global demand for technology services.
Accenture Plc expects to increase revenue and profit margin through to 2029, with organic growth backed by acquisitions, Bloomberg reported. The consulting company said it is targeting mid-single digit revenue growth in 2027 and 2028 and mid-to-high single digit growth in its 2029 financial year.
Q2 earnings - IT companies have posted better-than-expected earnings. India’s largest player TCS reported 15% year-on-year (YoY) growth in its consolidated net profit at Rs 13,884 crore for the second quarter. The same stood at Rs 12,075 crore a year ago. The Board has declared a second interim dividend of Rs 12 per share for the financial year 2026-27.
In constant currency terms, revenue rose 0.5% quarter-on-quarter. Operating margin came in at 24%, while net margin stood at 19%. CEO and MD K Krithivasan said the company saw broad-based growth across international markets and most industry segments.
AI’s capital roadblock - Earlier this week, Broadcom’s Hock Tan said capital could become a bigger constraint on AI expansion than shortages of semiconductors, memory chips or electricity. Intel CEO Lip-Bu Tan echoed the concern, flagging the rising cost of capital and the need for companies investing heavily in AI to demonstrate adequate returns.
The warnings come as investors reassess the sustainability of the AI-driven rally amid stretched valuations, intensifying competition and uncertainty over when heavy AI investments will translate into profits. Meanwhile, South Korea’s tech-heavy market plunged over 6% on Tuesday as the selloff in AI-linked stocks deepened.
Signs visible - OpenAI told investors last week that its annualised revenue for September was nearly $50 billion, lower than the figure it had indicated earlier, Reuters reported. At a separate event, the company had previously told investors that its September revenue run rate was approaching $70 billion.
The discrepancy largely stemmed from an effort to make a direct comparison with revenue figures from rival Anthropic, the Reuters report added.
IT stocks outlook
Axis Securities however remains cautiously optimistic about the IT services sector. "For the Indian IT sector, the pace of global AI adoption over the next 2-3 years remains a key concern for earnings growth and valuations.
However, if questions arise globally around the commercial viability of AI, potentially slowing its rollout, market concerns over Indian IT companies could ease," said Krishna Sanghavi, CIO Equity, Mahindra Manulife Mutual Fund.
"The sector may remain positive in the near term, supported by improving sentiment and buying interest following HCLTech's results, but after a sharp rally, some profit-booking and volatility cannot be ruled out," said Gaurav Garg, head of research at Lemonn Market desk.
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