TCS, Infosys, HCLTech, Tech Mahindra, Wipro shares jump; Nifty IT rises 5% in early trade. Here's why

Shares of Indian IT companies staged a sharp recovery in Tuesday's trade, with the Nifty IT sub-index rising more than 5 per cent in early deals, despite a downturn in the US Nasdaq index overnight.

The surge came as Nifty IT constituents added nearly Rs 1.2 lakh crore in market capitalisation (m-cap) during the early session.

Tata Consultancy Services Ltd (TCS), Infosys Ltd, HCL Technologies Ltd, Tech Mahindra Ltd, LTM Ltd and Mphasis Ltd were among the major gainers in early trade, helping lift the Nifty IT index.

Persistent Systems Ltd, Oracle Financial Services Software Ltd (OFSS) and Wipro Ltd also traded higher. Coforge Ltd was the only stock in the Nifty IT pack trading lower.

The recovery came amid a reassessment of the potential impact of the pace of development in frontier artificial intelligence (AI) models on traditional software companies.

Choice Institutional Equities noted, "Anthropic CEO Dario Amodei's call to 'pace the frontier', backed by OpenAI CEO Sam Altman, has raised concerns around the pace of AI infrastructure buildout and driven a sell-off in direct AI-linked companies. In contrast, software stocks have shown relative strength, with Infosys and Wipro ADRs up, while Cognizant, ServiceNow and Accenture gained. The divergence suggests investors are reassessing the risk-reward across tech, with a more measured pace of frontier-model development potentially reducing concerns around rapid obsolescence and disruption for traditional software."

On Indian IT, the domestic brokerage said, "A more measured AI development cycle could provide enterprises greater visibility on technology choices, reducing near-term obsolescence concerns and encouraging customers that had adopted a wait-and-watch approach to resume AI and digital spending. This should be incrementally positive for Indian IT, particularly across AI implementation, cloud transformation, governance and cybersecurity. Importantly, this may extend the monetisation window for IT vendors and provide more time to offset productivity-led pressure on legacy services. The structural risk of AI-driven productivity being passed onto clients remains in light, making the pace of AI-led revenue creation versus productivity-led deflation the key monitor."

Choice further stated, "The recovery in Indian IT ADRs comes ahead of the September 16 Fed decision, with markets pricing in ~90 per cent odds of a 25bps hike. Fed guidance, US yields and inflation commentary, alongside the evolving AI-spending debate, will remain key near-term drivers given Indian IT's high North America exposure."

Kranthi Bathini, Equity Strategist at WealthMills Securities, echoed a similar view, advising investors with a near-term view to hold. For the long term, he sees IT stocks as a contrarian bet and suggested a 'buy-on-dips' approach.

Ravi Singh, Chief Research Officer at Master Capital Services, stated, "Indian IT stocks may see near-term relief as Anthropic and OpenAI leaders call for slower AI development, reducing fears of rapid disruption. However, this could be a sentiment-driven rebound rather than a fundamental turnaround. The development may provide traditional IT companies more time to adapt, while AI-led disruption remains a key long-term industry trend."

Ponmudi R, CEO of Enrich Money, said, "The IT sector emerged as the standout performer, as investors rotated toward Indian software companies with established, traditional business models following the sharp sell-off in global technology stocks. The move comes after senior AI executives raised concerns over the pace of AI development, prompting investors to reassess technology stocks."

Meanwhile, the global debate over the pace of AI development has intensified, with some AI companies and technology leaders calling for greater caution amid concerns about the potential risks and uncertainty surrounding increasingly advanced AI systems.

However, US President Donald Trump has opposed calls to slow AI development, arguing that the US needs to continue advancing the technology to maintain its lead globally.

During his visit to Ireland, Trump said, "You have a lot of very negative forces that are bringing it up that shouldn't be bringing it up, and they're bringing up things that won't happen."

On the broader debate over AI risks, Trump added, "We're leading China on AI... and, frankly, I want to keep it that way because whoever wins AI, wins."