Nifty IT Index Rises 11.72% in a Week, Biggest Weekly Gain Since April 2008

India's IT stocks just had their best week in more than 18 years.

The Nifty IT index rose 3.92% on Friday, Oct. 16, to close at 31,924.10. That put its weekly gain at 11.72%, the steepest since April 2008. The 10 stocks in the index added ₹2.75 trillion in market value over the five sessions, ₹97,681 crore of it on Friday alone.

The index extended gains for a fourth straight session. Some trackers round the weekly figure to 11.5%. Per CNBC-TV18 data, the last comparable weekly move was the week ended Oct. 31, 2008, when the index rose 11.24%.

IT carried the benchmarks

The Nifty 50 rose 0.65% on Friday to 23,146.15, a gain of 148.80 points, and finished the week up 2.78%. The Sensex added 413.67 points to settle near 74,729 and gained 3.11% for the week. Both indices posted a second straight weekly gain, their biggest since April 10.

IT did the heavy lifting. Business Standard calculated that IT stocks accounted for about 94 of the Nifty's 149-point rise on Friday.

The rest of the market lagged. The Nifty Midcap 100 fell 0.11% and the Nifty Smallcap 100 slipped 0.01% on Friday. FMCG names stayed under pressure, with Nestle India down almost 1% on the day and 5.06% for the week. Even so, nearly 40 Nifty constituents posted weekly gains, according to CNBC-TV18, with winners including Tech Mahindra, TCS, Infosys, HCL Technologies and Bajaj Auto.

Earnings landed in the middle of the rally

The run started Tuesday, after HCLTech's September-quarter results. The Nifty IT index rose 5.2% that day, and HCLTech shares jumped more than 8%.

HCLTech's EBIT margin rose to 18.1%, up 130 basis points from the previous quarter and above estimates. Net new bookings hit $3.3 billion, up 27% from a year earlier. The company raised its FY27 revenue growth guidance to 2.5%-4% from 1%-4%.

Tech Mahindra was Friday's standout. Its shares climbed 8.48% after it reported quarterly revenue of ₹16,180 crore and new deal wins of $1.02 billion, up 25.4% from a year earlier. The company also announced a bonus issue. Newsbytes described it as the stock's strongest single-day rise since March 2020. Wipro gained 5.95% on Friday.

Not every result impressed. Wipro's September-quarter net profit came in at ₹3,200 crore, below the ₹3,306 crore analysts expected and 4.5% lower than the June quarter. Its IT services revenue was flat sequentially in constant currency.

Kranthi Bathini, director for equity strategy at WealthMills Securities, told NDTV Profit that the action in IT is "very stock specific." He described a "buy-on-dips, sell-on-rally" market and said "right now we tend to see some optimism and bottom-fishing."

The AI sell-off angle

Business Standard ties the weekly surge to a second driver: money leaving AI-linked stocks. US inflation data on Wednesday set off a sell-off. The Nasdaq Composite fell 1.88% that day, and Nvidia lost 4.9% between Tuesday and Thursday. The rout then hit Asia's chip-making markets.

JP Morgan's Sept. 15 report called India "the natural artificial intelligence (AI) hedge." It cited a market that is "large and liquid," with a weight of around 12% in the MSCI EM benchmark and domestic institutional investors who keep it moving without depending on foreign capital. JP Morgan said the alternatives were weaker: domestic China, at roughly 25% of the benchmark, faces a softer growth backdrop, and other non-AI havens are "too small to absorb large allocations."

The two explanations overlap but are not the same. The IT rally began Tuesday on company results, a day before the US inflation data. Which force moved more money has not been quantified by any source.

A bounce after a bad year

As of Thursday's close at 30,719.80, the Nifty IT was still down 14.78% over 12 months, worse than the Nifty 50's 10.67% decline, per NSE data cited by NDTV Profit. The index was the strongest of four major indices until mid-January, then fell sharply from February. By NDTV Profit's reading of the chart, it lost about 30% from its peak by late June.

Other backdrop: Brent crude traded near $105 a barrel on Friday, down from about $106 earlier in the week, and the rupee extended its recovery against the dollar. Higher oil prices remain a concern for an economy that imports most of its crude.

Whether the money that moved this week was a short-term rotation out of AI stocks or a lasting re-rating of Indian IT remains open. Infosys is due to report its results on Oct. 22-23, and the remaining September-quarter reports from the sector will show whether Tech Mahindra's and HCLTech's margins and deal wins are the norm or the exception.