3 weeks ago
Indian IT sector bucks AI stock sell-off as investor sentiment shifts
Some people who buy stocks were scared that new AI technology would hurt companies that help other businesses with computers.
Those companies, called IT companies, are mostly in India, and lots of people were selling their stock.
But recently, their stock prices have started going up again.
People realized that using AI in big companies takes time and needs a lot of help from experts.
That means IT companies still have a big job to do, like helping businesses connect AI to their old computer systems.
They also need to keep data safe and make sure everything is high quality.
Because of this, investors think these companies are valuable again.
Not every IT company is being rewarded, though.
Only the ones showing they can really use AI well are getting praise.
In the future, big tech companies plan to spend lots of money on AI, and IT firms will help put that AI to work.
So instead of AI destroying these companies, it might actually give them more work to do.
Indian IT companies were largely spared the recent global correction in AI-linked technology stocks.
Analysts say markets now recognize enterprise AI adoption will be slower and more services-intensive than initially expected, creating opportunities for IT firms.
The Nifty IT index has trended upward over the past month, recovering from its 52-week low in early July.
Investors are becoming more selective, rewarding firms with credible AI execution such as Cognizant rather than conventional services growth alone.
HFS Research estimates hyperscaler AI capital expenditure will reach $700 billion in 2026, driving demand for consulting, integration, governance and security services.
- Who
- Indian IT services companies, global investors, and analysts including Phil Fersht of HFS Research, Saikat Banerjee of Bain & Company, Gaurav Parab of NelsonHall, and Sandeep Khomne of Asterial Technologies.
- What
- Indian IT stocks avoided the global AI-related tech sell-off and have been recovering and gaining investor favor as markets recalibrate their view of AI's impact on the services sector.
- Where
- India (Indian IT sector and Nifty IT index), in the context of global stock markets.
- When
- Over the past month, following a 52-week low for the Nifty IT index in early July.
- Why
- Markets overestimated the pace of AI's disruption of traditional outsourcing; enterprise AI adoption is slower and more services-intensive than expected, creating demand for consulting, integration, governance and security.
Structural revival expected
Short-term recalibration only
Nature of the IT sector rally
Structural revival expected
The recent rise in Indian IT stocks could be seen as the start of a broad-based revival for the IT services sector.
Short-term recalibration only
Analysts say the rally is not the start of a broad-based revival; it is a recalibration of expectations after markets overestimated the pace of AI's disruption of traditional outsourcing.
Key facts
- Sector
- Indian IT services
- Market benchmark
- Nifty IT index
- Recent trend
- Upward trend over the past month after hitting a 52-week low in early July
- Hyperscaler AI capex estimate (2026)
- $700 billion (HFS Research)
- Enterprise AI adoption
- Nearly three-fourths of enterprises are replacing or planning to replace parts of traditional services with AI-led solutions
- Key company cited
- Cognizant, rewarded for credible AI execution
- Adoption challenges
- Data readiness, governance, integration and security
Quotes
Phil Fersht
Founder and CEO of HFS Research
“The reaction to Cognizant’s results is a good example of this, where the market rewarded improving execution and a more credible AI transformation story rather than simply another quarter of conventional services growth. This is not Wall Street deciding that the old model is healthy again. It is recognising that selected services firms can use the strengths of the old model to build the next one.”
financialexpress.com
“The movement clearly demonstrated that while investors are mainly rotating out of crowded AI trades, they may have become too pessimistic about the services sector.”
financialexpress.com
Saikat Banerjee
Partner and leader of Bain & Company's AI practice in India
“The Nifty IT index has seen an upward trend over the past month, recovering from its 52-week low in early July. While a month is too short a duration to call this a structural resurgence, it is definitely a step in the right direction for the sector.”
financialexpress.com
Sources
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