IT Stocks Surge: Understanding the Recent Rally of Infosys, TCS, HCL Tech, and Tech Mahindra
Indian IT stocks, including Infosys, Tata Consultancy Services (TCS), HCL Technologies, and Tech Mahindra, experienced a notable surge, jumping by up to 4% on Thursday. This rally has caught the attention of investors and market analysts alike, prompting a closer look at the factors driving this positive momentum.
One of the primary reasons cited for the upswing is renewed optimism surrounding a potential trade agreement between India and the United States. Reports indicate that the agreement could lead to a reduction in US tariffs on Indian imports, potentially dropping from 50% to a range of 15% to 16%. Such a development would significantly benefit the Indian IT sector, making it more competitive in the US market and boosting revenue prospects.
Broader market dynamics also play a crucial role. Optimism regarding potential interest rate cuts by the US Federal Reserve has buoyed global markets, with technology stocks in India benefiting considerably. Lower interest rates in the US tend to make emerging markets like India more attractive to foreign investors, leading to increased inflows into the IT sector.
Furthermore, the Indian IT services sector is showing signs of demand stabilization, contributing to the positive sentiment. Major IT firms have reported sequential revenue growth in recent quarters, indicating a potential turnaround after a period of slower expansion. Analysts estimate a further sequential rise in services revenue for the December 2025 quarter.
The improving macroeconomic environment and the US Federal Reserve's recent interest rate cut also contributed to the upswing.
While the overall outlook remains cautiously optimistic, some analysts point to potential headwinds. Subdued client spending due to macroeconomic uncertainties and the increasing impact of artificial intelligence (AI) on productivity could compress traditional growth avenues. Nevertheless, a recent survey showed that 77% of tech CEOs anticipate higher business growth, and 85% expect client tech spending to remain the same or increase in FY26 compared to FY25.
The Indian IT sector is expected to grow by 5.1% to $282.6 billion in FY25, a step up from the 4% growth seen in FY24. While growth rates are still in the single digits, the industry is gradually witnessing an increase in year-on-year expansion. The sector is projected to surpass the $300 billion revenue milestone in FY26.
Looking ahead, the Indian IT industry is likely to reach US$ 350 billion by 2026, contributing nearly 10% to the nation's GDP. Increased adoption of cloud technology alone could generate 14 million jobs and add Rs. 33,01,060 crore (US$ 380 billion) to GDP by 2026, underscoring the sector's critical role in shaping India's digital and economic future.
