Last Updated:June 16, 2025, 12:21 IST
After months of underperformance, Indian IT stocks have staged a robust rebound over the past month; Should you buy?
Indian IT Stocks Rise
Indian IT Stocks Rebound: After months of underperformance, Indian IT stocks have staged a robust rebound over the past month, driven by improving global cues and renewed investor confidence. Easing macroeconomic concerns, attractive valuations, and clarity on regulatory risks have brought both large-cap and mid-cap IT names back into the spotlight.
Indian IT stocks have staged a notable rebound over the last few months, recovering from a prolonged phase of underperformance. This recovery has been driven by easing global macroeconomic headwinds, stabilizing interest rate expectations, and attractive valuations that lured investors back into the sector.
Among large-cap names, LTIMindtree (LTIM) has surged over 20% in the past three months, buoyed by strong deal wins and upbeat guidance for Q1 FY26. Infosys has gained around 15%, while TCS and HCLTech have risen by 12–14%, reflecting growing optimism around global IT spending recovery. In the mid-cap space, Mastek has jumped nearly 30%, supported by its strategic focus on AI and healthcare in the UK market. Happiest Minds has also climbed about 25%, driven by acquisitions and vertical-focused growth initiatives. This broad-based rally highlights renewed investor confidence in the long-term prospects of India’s IT sector.
To better understand the factors driving this recovery and what lies ahead for the sector, News18.com spoke with Sushovon Nayak, Research Analyst at Anand Rathi Institutional Equities.
IT Stocks Have Shown A Rebound Recently — What’s Driving This Rally?
According to Nayak, the recent rally in Indian IT stocks is underpinned by a combination of global macro improvements and sector-specific developments.
“Indian IT stocks have rallied recently as tariff fears—once stoked by proposed levies on their clients’ industries in Europe and the US—have eased. These tariffs were not directly targeting IT services but had created concerns over cross-border revenue flows. With those fears subsiding, confidence has returned,” Nayak explained.
Additionally, US inflation trends have been favorable, reinforcing expectations of a more dovish US Federal Reserve. Inflation dipped to 2.3% in April before returning to 2.4% in May, still below consensus estimates, increasing the likelihood of rate cuts that could unlock corporate IT budgets globally, he added.
After a 33% correction from late-2024 highs, IT valuations became significantly more attractive, drawing value-seeking investors back into both large-cap digital firms and high-growth mid-caps.
Is The IT Rally Sustainable?
While optimism has returned, Nayak remains cautious in the near term due to lingering global uncertainties. “The sector has moved from oversold to fair-value territory, which means the short-term upside may be limited without further positive triggers,” he said.
He warned that macroeconomic risks such as a potential US credit-rating downgrade or a weakening dollar could hurt sentiment or earnings. Additionally, most Indian IT bellwethers have provided muted guidance for H1 FY26, suggesting limited near-term momentum.
“That said, the long-term structural dynamics—including cloud migration, AI-driven transformation, and digital demand—remain firmly in place. Any interim pullback could be a good buying opportunity for long-term investors,” he added.
Large-Cap Vs Mid-Cap IT: Where To Invest?
When asked where investors should focus their attention—large caps or mid/small caps—Nayak offered a clear view. “Among large-caps, LTIMindtree (LTIM) is our top pick. The company has seen consistent deal wins and is the only one among peers to guide for a stronger Q1 FY26 versus Q4 FY25. Its leadership team, particularly Mr. Venu, has executed well, and LTIM is uniquely positioned to outperform in retail and manufacturing, where others have flagged weakness.”
In the mid-cap and small-cap space, Nayak highlighted Mastek and Happiest Minds as strong opportunities.
“Mastek stands out due to its Data and AI strategy and the UK government’s increasing focus on preventive healthcare, where the company has a strategic edge. Its current valuation also provides a comfort cushion,” he noted.
“Happiest Minds, on the other hand, is a transformational story. With BFSI and healthcare-focused acquisitions, a restructured business model, and vertical-based client mining strategies, the company is well-positioned for growth. Their new Chief Growth Officer (CGO) is also focused on expanding client relationships and securing new business,” Nayak added.
While Indian IT stocks may face some turbulence in the short term due to macroeconomic headwinds, the medium- to long-term outlook remains constructive. Investors with a longer horizon could benefit from selective exposure to structurally sound names, especially in companies with differentiated strategies and execution capabilities.
As the dust settles on global uncertainties and corporate tech spending begins to recover, the Indian IT sector could very well be at the cusp of its next growth cycle.
Aparna Deb is a Subeditor and writes for the business vertical of News18.com. She has a nose for news that matters. She is inquisitive and curious about things. Among other things, financial markets, economy, a…Read More
Aparna Deb is a Subeditor and writes for the business vertical of News18.com. She has a nose for news that matters. She is inquisitive and curious about things. Among other things, financial markets, economy, a… Read More
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