IT stocks on fire, rally up to 15% today; check performance of TCS, L&T Technology, Wipro, Infosys | Jefferies bullish
IT Stocks Today: Indian IT stocks witnessed strong buying on Wednesday, October 21, with L&T Technology Services leading the rally after reporting robust second-quarter results. Moreover, a bullish outlook for the sector by global brokerage house Jefferies also added to the positive sentiment.
The Nifty IT index climbed as much as 2.6% to an intraday high of 32,348.25, significantly outperforming the benchmark Nifty 50, which gained around 1%. All IT constituents traded in positive territory, suggesting that the buying extended beyond individual earnings announcements.
L&T Technology Services (LTTS) surged as much as 15%, while Wipro advanced 4%. Infosys, Tata Consultancy Services (TCS), Tech Mahindra, HCL Technologies and Mphasis gained between 2% and 3.5%. Persistent Systems, LTIMindtree (LTM) and Coforge also rose more than 1% each.
A strong start to the second-quarter earnings season has helped improve sentiment towards IT companies, with investors responding to better-than-expected results and signs of stabilisation in business conditions. TCS and HCL Technologies have also reported earnings above expectations, offering some reassurance amid concerns about technology spending and the disruptive impact of AI.
L&T Technology Services emerged as the standout performer after reporting higher revenue and profitability for the September quarter.
The company's Q2FY27 revenue increased 3.4% quarter-on-quarter (QoQ) and 12.1% year-on-year (YoY) to ₹3,040.4 crore. Dollar revenue rose 2.7% QoQ and 4.8% YoY in constant currency terms to $317 million. Net income jumped 53.7% QoQ and 66.8% YoY to ₹548.2 crore.
Another factor supporting the sector is renewed interest in traditional IT expenditure following Accenture's guidance for the next financial year. Expectations of an improvement in conventional technology spending have encouraged investors to buy quality IT stocks, contributing to the broader advance in the Nifty IT index.
However, the recovery remains vulnerable to external pressures. Elevated crude oil prices, high US bond yields and continued foreign investor outflows remain concerns for the broader market. Within IT, uncertainty over AI-driven changes in client spending, future revenue growth and the sustainability of valuation multiples continues to influence stock selection.
Jefferies believes Indian IT stocks could see a valuation re-rating as earnings resilience challenges pessimistic assumptions about long-term growth. In its October 21 note, the brokerage said the sector's share-price correction had already factored in lower growth expectations, leaving room for recovery if companies avoid further disappointments.
“With IT firms still delivering growth despite weak macro and AI-deflation, investors are more willing to revisit their terminal growth assumptions,” the brokerage said in a note.
Jefferies identified Infosys and Sagility as offering the most attractive risk-reward opportunities among their respective peers. It also highlighted Infosys and TCS as the only large-cap IT stocks with potential for a re-rating under its assessment, raising its price targets for both companies despite maintaining cautious ratings.
For Infosys, Jefferies retained its 'Hold' rating but increased its target price to ₹1,160 from ₹1,020. For TCS, it maintained its 'Underperform' rating while raising the target price to ₹2,125 from ₹1,800. The brokerage has raised target prices across large-cap IT companies by 14-18%, while remaining selective in its recommendations.
Its valuation framework outlines sharply different outcomes depending on the sector's long-term growth trajectory. In the worst-case scenario, Indian IT companies could fail to deliver growth beyond FY29, potentially resulting in valuations of just 12-13 times earnings. In the best-case scenario, companies would sustain the long-term revenue growth trajectory recorded between FY21 and FY26.
Under the optimistic scenario, Jefferies sees more than 20% re-rating potential for Infosys and TCS among large-cap IT companies. Sagility stands out among mid-sized companies, with potential upside from a valuation re-rating exceeding 50%. Jefferies also considers the downside risks for Infosys and Sagility to be among the lowest in their respective peer groups.
The brokerage's analysis suggests that current valuations already incorporate relatively modest organic revenue growth expectations. Large-cap IT companies are pricing in constant-currency revenue growth of 0-9% on a compound annual growth rate (CAGR) basis, compared with 6-14% for mid-sized IT companies. These implied growth rates are generally 2-4 percentage points below historical levels.
Jefferies cautioned that the sector's outlook remains uncertain, particularly if global AI capital expenditure sentiment deteriorates or companies fall short of FY27 and FY28 growth expectations. Any re-rating, therefore, is likely to depend on individual companies' ability to sustain revenue growth, deliver earnings and justify higher valuation multiples rather than a broad-based recovery across the entire IT sector.
Pranati Deva is a seasoned financial journalist with over a decade of experience in high-pressure newsroom environments, currently working as a Senior Sub Editor at LiveMint. Over the years, she has developed a reputation for sharp editorial judgement, a strong grasp of market dynamics, and the ability to translate complex financial developments into clear, engaging stories for a wide audience. <br><br> Her core areas of coverage include stock markets, leading listed companies, currencies, and commodities, with a particular strength in fast-paced, real-time market reporting. She is known for handling breaking market news, earnings-driven stock movements, and macroeconomic developments with speed, accuracy, and context—qualities that are essential in financial journalism. <br><br> Pranati has built a diverse and credible professional track record across some of India’s most respected news organisations, including MintGenie, CNBC-TV18, Business Standard and EconomicTimes.com. During her stints at these platforms, she produced data-driven market stories, curated and steered live blogs during volatile trading sessions, and conducted interviews with market veterans, fund managers, economists, and industry experts. Her work often combines on-ground reporting with analytical depth, helping readers make sense of daily market fluctuations and longer-term trends. An alumnus of the Symbiosis Institute of Media and Communications and Hansraj College, University of Delhi, Pranati brings a strong academic foundation to her journalism. She specialises in real-time financial reporting, with a keen focus on precision, balance, and insight, aiming to decode market movements in a way that is both informative and accessible to readers across experience levels.
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