Mumbai: The Nifty IT index has recovered sharply, rising about 8 percent from its April lows. However, despite this rebound, the index is still down around 23 percent over the past one year, showing that the sector is yet to fully recover from earlier declines.
What Is Driving The Recovery?
The recent rise is mainly due to better valuations and investor positioning. According to BNP Paribas, the gap between Nifty IT performance and the Nasdaq had reached very low levels in March 2026, making the sector look attractive again.
At the same time, foreign investor exposure to IT stocks has dropped to around 6 percent, near all-time lows. Domestic institutional ownership has also fallen sharply to 6.6 percent from earlier levels of 14 percent. This low ownership suggests room for fresh buying.
A weaker rupee has also supported IT companies, as it helps improve their earnings from overseas business.
Valuations Still Attractive
Valuations of major IT companies remain lower than historical levels. Tata Consultancy Services is currently trading at about 15-15.5 times its FY28 estimated earnings, compared to 20-22 times before Covid and 30-32 times at post-Covid highs.
Similarly, Infosys is valued at around 16.5 times, lower than its earlier range of 18-20 times and peak levels of 28-30 times.
Key Triggers Ahead
Going forward, earnings and management guidance will be crucial for the sector. Wipro is set to announce its results on April 16, which will be closely watched by investors.
The market is expecting clarity on demand outlook, future growth, and a possible share buyback announcement.
Deal Activity Adds Support
Wipro has recently won a major USD 1 billion deal with Olam Group. As part of this, it will acquire a 100 percent stake in Mindsprint for USD 375 million.
It has also agreed to acquire select contracts from Alpha Net Consulting LLC for up to USD 70.8 million, which may support future growth.
Outlook Remains Mixed
While short-term factors like currency benefits and low valuations are helping the sector, uncertainty around global demand and technology spending continues to remain a concern.