After years of underperformance, Indian IT stocks are once again drawing investor attention. The Nifty IT index has risen more than 6% over the last one month, supported by improving visibility on artificial intelligence-led revenues, better signals from the US demand environment, and easing currency pressures.
Together, these factors have lifted sentiment toward large technology exporters after a prolonged phase of cautious positioning.
The rally has been steady rather than abrupt. The index has gained over 4% in December so far, marking its third consecutive month of gains. Global technology stocks have also seen an improvement in sentiment, which has helped strengthen the outlook for Indian IT firms.
In the last 1 month, all Nifty IT constituents, except 1, have given positive returns. L&T Technology was the top gainer, up almost 10% followed by Infosys, Tech Mahindra and Wipro, rising almost 9% each. LTI MindTree, TCS, and HCL Tech also rose between 5-6% each.
AI revenue visibility and US demand lift sentiment
A key trigger behind the recent strength in IT stocks has been clearer disclosure around AI-driven revenues from global and domestic technology leaders. Accenture’s latest quarterly results provided one of the most concrete signals yet that enterprise AI spending is beginning to translate into actual revenue.
Accenture reported consolidated revenue of $18.7 billion for the September-November quarter, along with advanced AI new bookings of $2.2 billion. Since Accenture follows a September-November fiscal quarter as its first quarter, these numbers are widely seen as an early indicator of demand trends that Indian IT companies could experience during the October-December period.
These disclosures have reinforced expectations that AI-led deal pipelines are moving beyond early experimentation. As Nomura has noted, clients are increasingly shifting from “proof-of-concept projects to standalone AI implementations”, a transition that is critical for meaningful revenue generation.
Support has also come from the macro environment in the US, the largest market for Indian IT services. Sentiment around US demand improved after the latest interest rate cut, raising expectations of a gradual recovery in discretionary technology spending. This has added to optimism around deal activity and client budgets.
However, challenges remain. Visa restrictions and higher H1-B visa fees continue to pose headwinds for the sector, even as IT stocks show resilience and attempt a recovery from a prolonged dull phase.
A tough four years and what lies ahead
Indian IT stocks have endured a difficult four-year stretch. After a strong pandemic-driven rally in 2020 and 2021, growth slowed sharply due to global economic uncertainty. In 2021, the Nifty IT index surged nearly 60%, driven by emergency technology spending, cloud adoption and robust deal pipelines.
That momentum reversed in 2022, when the index fell over 26% as global inflation, aggressive rate hikes and recession fears forced clients to cut discretionary technology spending. Although the index recovered in 2023 and 2024 with gains of around 24% and 22%, the rebound lacked conviction as markets grappled with early uncertainty around AI adoption.
In 2025 so far, the Nifty IT index is down more than 10%, making it the sector’s second-worst performance of the past decade.
The underperformance has been driven by both cyclical and structural factors. On the cyclical side, global clients-particularly in the US and Europe-have delayed large transformation projects despite healthy profitability. On the structural side, productivity gains from cloud, automation and AI have reduced manpower requirements, supporting margins but limiting short-term revenue growth.
Still, signs of change are emerging. Nomura notes that nearly every Indian IT services company is preparing for AI investments across internal operations, client solutions and ecosystem partnerships. TCS has already reported ₹12,500 crore in annualised AI-related revenue, describing AI as a “civilizational change” for enterprises.
Looking ahead, the outlook for 2026 appears more balanced. Nomura expects around 4.5% revenue growth for large IT firms in FY27, with mid-sized companies growing faster. HSBC sees 4-6% growth as achievable if global confidence improves. While Jefferies remains underweight on the sector, the combination of AI adoption, improving demand signals and strong cash flows is gradually reshaping the narrative around Indian IT stocks.