The technology stocks are in the spotlight. Strong buying in major Information Technology (IT) counters pushed the Nifty IT index sharply higher for the third straight trading session. The Nifty IT index surged more than 4% in the intraday trading session today. With this move, the index has now rallied nearly 8% in just three trading sessions.

Is the worst over for the technology sector? Market gurus pointed out that some structural concerns continue. They see the sector navigating challenging times brought on by macro-economic uncertainty. They also believe that AI adoption is unlikely to materialise meaningfully in the very near-term. This is seen as a key concern.

IT stocks lead the rally

In the intraday trading session, all the 10 constituents of the Nifty IT sector were trading in positive territory.

Coforge emerged as one of the strongest performers, rising nearly 6% in intraday trade. Mphasis also climbed more than 5%, while Oracle Financial Services Software (OFSS) gained over 5%.

Large-cap names also saw strong traction. Infosys jumped more than 4%, while Tech Mahindra, Persistent Systems and LTIMindtree gained between 4-5%. Tata Consultancy Services (TCS), HCL Technologies and Wipro also traded firmly higher in the intraday trading session.

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Falling rupee boost IT earnings outlook

One of the biggest reasons behind the rally is the weakness in the Indian rupee.

The rupee recently slipped to record lows against the US dollar, and that generally works in favour of export-oriented IT companies. 

Since Indian software companies earn a large share of their revenue in dollars, a weaker rupee improves earnings realisation once overseas revenue is converted into Indian currency.

Is the worst over for the tech sector: Analysts cautious

The big question now is can this overshadow the AI headwinds?, Despite the sharp rally, several market gurus believe the sector is still facing structural challenges.

Manish Sonthalia, Director and CIO of Emkay Investment Managers said, “I have an underweight stance now on the sector. AI is massively disruptive. Growth expectation is getting reset across the sector. Valuations are suggesting the sector is set for zero growth in the best case and or negative growth in the medium term due to AI disruption.”

Shibani Kurian, Senior Executive Vice President, Fund Manager & Head – Equity Research, Kotak Mutual Fund, said, “The sector is navigating challenging times brought on by macro-economic uncertainty which is impacting discretionary tech spends and the transformational shift due to the adoption of AI at the enterprise level.”

She further added, “Even while the sector is now trading at valuations lower than its own historic average multiples, the outlook for growth remains subdued as has been corroborated by various management commentary during Q4FY26 earnings. Typically, we have seen that topline growth is one of the key drivers for multiples of the sector.”

Is AI the gamechanger for tech?

Speaking about Artificial Intelligence and its impact, Kurian said, “The debate around AI and its impact on the sector and the services ecosystem continues. There is no denying that the medium-term opportunity from enterprise AI adoption is real but is unlikely to materialize meaningfully in the very near term.”

Kurian also noted, “AI-led deflation is creating a structural revenue and margin headwind as productivity gains are passed through to clients and the competitive intensity remains high.”

Kotak marginally Underweight IT

Elaborating on the sector outlook, Kurian outlined why they continue to be slightly Underweight. 

She highlighted that, “We have been marginally ‘underweight’ the IT sector. We see limited near-term catalysts for a broad sector re-rating immediately and the sector at best could remain in a trading zone. Given this outlook, selectivity is essential — prefer names with AI-led deal momentum, strong TCV-to-revenue conversion, and margin resilience.”

Global tech sentiment improves

Another key factor supporting Indian IT stocks is the strength seen in global technology shares, particularly in the United States.

Wall Street technology companies have continued to see strong investor interest, with markets betting that spending on software, cloud computing and digital infrastructure may remain resilient despite macroeconomic uncertainty.

AI optimism returns to the sector

Artificial intelligence (AI) has once again become an important talking point for the sector.

Investors are increasingly focusing on the possibility that Indian IT firms could benefit from rising enterprise spending on AI services, automation, cybersecurity and cloud migration in the coming years.

Although Indian IT firms are not pure AI product companies, many large software exporters have started investing heavily in AI-led services, partnerships and automation solutions for global clients.