TCS shares rally 11% in a week: IT major poised for bigger recovery as ‘Reverse AI Trade’ gains momentum? Decoded
Tata Consultancy Services (TCS) shares have staged a sharp recovery, gaining around 11% in a week as better-than-expected quarterly results and rising artificial intelligence (AI) revenue eased investor concerns. The stock rebounded over 18% from a 52-week low near ₹1,976 in July 2026 to around ₹2,335 currently, drawing buying interest after its steep decline from previous highs above ₹4,600.
The recovery also reflects a changing market narrative around AI. Investors initially feared that automation would reduce demand for conventional IT services. However, growing enterprise demand for integrating AI into complex business systems has raised expectations that technology service providers could benefit from the next phase of adoption.
The IT stock has also added 5% in 1 month as well as 3 months. However, It has lost 7% in 6 months and 22% in the last 1 year.
TCS shares had fallen around 30% over the preceding year amid concerns about slower technology spending and AI-led disruption. The correction has made valuations more attractive to some investors, contributing to the recent recovery.
The so-called ‘Reverse AI Trade’ reflects a shift in investor focus from AI tools that automate individual tasks towards the complex work required to deploy AI across large organisations. While AI-led coding and automation initially raised concerns about the traditional IT services model, businesses increasingly need specialist support to integrate these technologies into existing banking, healthcare and software platforms.
Mayank Jain, market analyst at Share.Market by PhonePe, said the growing complexity of enterprise AI adoption was creating opportunities for IT service providers such as TCS.
“Instead of replacing IT service providers, major enterprises are actively hiring companies like TCS to manage data pipelines, build infrastructure, and deploy custom AI applications,” Jain said.
TCS’s AI business has also provided a tangible reason for investors to reassess its growth prospects. Its AI revenue scaled to more than $3.1 billion, while its quarterly results exceeded expectations, according to Jain. Institutional buying also supported the recovery as the stock became more attractive following its significant correction.
Jain added that concerns surrounding US regulatory developments, including PERM suspensions, had eased, given TCS’s limited exposure to the issue.
However, the sustainability of the rally will depend on whether AI-related growth can offset potential pressure on traditional outsourcing services. Although AI adoption could create fresh opportunities, automation may also reduce the volume of work required for certain existing contracts.
From a technical perspective, Jain identified ₹2,000 as an important support level, noting that the stock had formed a double-bottom pattern around this zone. The recovery was accompanied by rising trading volumes, strengthening the near-term technical setup.
He said the stock now faced resistance near ₹2,500. A decisive breakout above that level, supported by strong volumes, could improve the prospects of a move towards ₹2,700. Investors considering fresh positions could watch for a pullback towards support or wait for confirmation of a breakout, while existing shareholders could consider managing risk through a trailing stop-loss.
Moreover,Jigar S Patel, senior manager of technical research at Anand Rathi Share and Stock Brokers, also highlighted the importance of the ₹2,000–1,970 zone. He said the daily Relative Strength Index (RSI) had formed regular and hidden bullish divergences between March and September 2026, suggesting improving momentum despite the stock’s earlier weakness.
Patel said the technical indicators supported the possibility of a gradual recovery, provided the stock held its key support zone.
“As long as the ₹2,000–1,970 support zone holds on a closing basis, we expect the stock to gradually move higher,” Patel said.
He identified ₹2,500 as the potential upside level, but cautioned that a decisive closing below the support zone would invalidate the bullish outlook.
“Therefore, ₹1,970 remains the key level to watch,” Patel said.
Moreover, TCS reported revenue of ₹73,188 crore and net profit of ₹13,884 crore in the second quarter of FY27. Deal wins totalled $9.6 billion, while its operating margin stood at around 24%.
The company’s annualised AI revenue increased from $2.6 billion to $3.1 billion, registering sequential growth of 19.2%. AI services now account for more than 10% of revenue on an annualised basis, according to figures reported by INDMoney. TCS has also expanded its AI capabilities through partnerships with global companies, including Porsche and Best Buy.
Growing AI demand could support TCS by generating fresh projects in enterprise AI implementation, software modernisation and technology management. Its established client relationships and technical expertise could help businesses integrate AI into complex operations, creating opportunities beyond conventional outsourcing.
However, overall business momentum remains subdued. Revenue grew just 0.5% sequentially in constant-currency terms, indicating that rapid AI growth has yet to translate into a broader acceleration. Whether AI adds to existing revenue or replaces traditional IT work will remain crucial to TCS’s growth outlook.
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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