Information technology (IT) shares price movement Shares of information technology (IT) companies rallied up to 5 per cent on the National Stock Exchange (NSE) in Tuesday’s intraday deals after HCL Technologies reported in-line performance for the July-September quarter (Q2FY27) with strong Advanced AI momentum.
The Nifty IT index rallied 3.3 per cent in intra-day deals. Share prices of HCL Technologies and Tata Consultancy Services (TCS) rallied 5 per cent each, while Mphasis, Wipro, Tech Mahindra and LTM were up in the range of 3-4 per cent. Infosys, Persistent Systems, Coforge and Oracle Financial Services were up 2 per cent each.
At 09:55 AM, the Nifty IT index was the top gainer among sectoral indices, up 3.3 per cent, compared to a 0.95 per cent rise in the Nifty 50. In the past four trading days, the IT index outperformed the market by gaining 5.6 per cent, against a 1.2 per cent rise in the benchmark index.
Why IT index outperformed market in past four days? HCL Tech’s management highlighted that demand was healthy towards the end of the quarter, with the pipeline remaining strong and balanced across service lines, verticals and geographies. Clients are prioritising AI, data and operating model transformation where there is a clear business case for efficiency, innovation and resilience.
The company noted that services growth was broadbased, reflecting demand for AI, cloud, cybersecurity and application modernisation. However, it remained cautious given the fluid macro environment and the potential for external developments to alter spending priorities quickly.
ICICI Securities in a note said that HCL Tech delivered a largely in-line quarter, with strong Advanced AI momentum partly offset by continued weakness in HCL Software. While inorganic contribution accounted for ~62bps of services growth, organic growth of 2.3 per cent remains encouraging after two quarters of decline.
However, despite recording its strongest-ever H1 and second-highest bookings, management remains cautious on the fluid demand environment and narrowed FY27 services revenue growth guidance to 3-4 per cent (vs. 1.5– 4.5 per cent year-on-year (YoY) constant currency (CC) earlier) and overall company guidance to 2.5-4 percent (vs.
1–4 per cent YoY CC earlier). On the margins front it maintained its margins for full-year in the range of 17.5–18.5 per cent. The brokerage firm said they therefore maintain a 'Neutral' stance, awaiting sustained organic growth acceleration and further evidence of AI-led monetisation.
Further, TCS anticipates H2FY27 performance to remain stable on account of a strong order book, large mega deals, AI-led transformation and positive momentum across most industry verticals. Therefore, with such healthy prospects, workforce upskilling and reinvestment of gains into capabilities, analysts at Axis Securities believe the growth momentum will remain intact in the subsequent quarters.
Meanwhile, after a 30 per cent decline in the Nifty IT index over the past year, valuations have compressed to historically low levels. Most IT-services stocks trade at multi-year lows and at a significant discount to their 10-year averages, reflecting AI-led deflation, weak demand and macroeconomic headwinds despite resilient margins, cash generation and deal wins.
“Current multiples imply modest growth expectations, while payout and free-cash-flow yields remain attractive. Lower token costs could also create significant opportunities for leading IT-services firms. We see limited downside to valuations from current levels,” said analysts at Systematix Institutional Research in the IT sector Q2 result preview.
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