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All the 10 components of the index advanced up to 4% with major gains led by Coforge, Tech Mahindra, LTIMindtree among others.
What’s driving the surge in IT stocks?
1. Rupee depreciation boosts earnings prospects
The weakening of the Indian rupee against the US dollar has emerged as a significant factor behind the surge in IT stocks. The rupee slipped to 84.85 against the dollar in early trade, nearing an all-time low, driven by foreign fund outflows and rising crude oil prices.
“Industry prospects have not changed in my view, but the fall in the value of the rupee against the US dollar has a positive impact on the IT space,” said G Chokkalingam, Founder of Equinomics Research Pvt Ltd. He added that IT companies typically benefit from a weaker rupee, as a significant portion of their revenues is earned in dollars, boosting profitability when converted to Indian currency.
2. US tech rally lifts sentiment
The tech-heavy Nasdaq Composite surged to a record high, crossing the 20,000 mark for the first time during Wednesday’s trade. This development, along with optimism about increased tech spending in the US, lifted investor sentiment for Indian IT companies.
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Narendra Solanki, Head of Fundamental Research at Anand Rathi Shares and Stock Brokers, noted, “The Indian IT sector traded in green today as US November’s Consumer Price Index report came in line with economists’ estimates, leading investors to anticipate another rate cut from the Federal Reserve at its policy meeting next week, which is positive for the sector as expectations of tech spending pick up in the US.”
3. Hopes for Federal Reserve rate cut
Investor optimism was further supported by the US Consumer Price Index (CPI) data, which aligned with market expectations. The annual inflation rate for November stood at 2.7%, reinforcing bets that the Federal Reserve may lower interest rates at its upcoming meeting.
A rate cut is anticipated to stimulate the US economy, particularly in sectors like technology, where spending tends to increase during periods of monetary easing.
Broader market outlook
Solanki believe the IT sector is poised to benefit from these global tailwinds. The industry, which has been in a recovery phase, is likely to see a pick-up in deal-making activity in the latter half of 2025.
Moreover, a bullish technical breakout in the Nifty IT index, as it breached a key trendline resistance, indicates potential for further gains.
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“While the rupee’s depreciation and global cues are immediate positives, it’s important to stay defensive in the IT space, as core industry fundamentals remain unchanged,” Chokkalingam advised.
