Bengaluru: India’s beaten-down information technology (IT) stocks are rebounding as fears that artificial intelligence (AI) will disrupt traditional tech services ease and investors rotate out of a global tech sell-off, even after a weak September quarter for the sector’s biggest names.
Shares of India’s four of five largest IT services companies rose by as much as 8% on Friday, extending gains even after a muted September quarter. Three of the top four, Tata Consultancy Services Ltd (TCS), HCL Technologies Ltd and Wipro Ltd, posted their weakest September-quarter performance in three years.
The rally came as technology stocks sold off in South Korea, with the Kospi’s 14% decline this week pointing to a shift in global investor positioning. Easing concerns over AI and a rotation in global tech investments appear to be lifting sentiment toward Indian IT, whose valuations had been under pressure since the AI boom stoked disruption fears.
AI stocks have come under pressure in recent days amid concerns that slowing revenue growth, rising infrastructure costs and tighter financing conditions could undermine lofty valuations. The Nasdaq 100 has fallen 3% since Monday. Sentiment also got a lift from finance minister Nirmala Sitharaman’s remarks earlier this week that she was open to views on taxation in capital markets.
“One of the factors may be the finance minister’s comments that foreign portfolio investors may be exempted from capital gains tax. Should this happen, IT stocks may benefit, given their relatively beaten-down valuations, especially if it is accompanied by the unwinding of the AI trade globally,” said Pramod Gubbi, founder of Marcellus Investment Managers.