Indian IT Stocks Lead October Gains on Attractive Valuations and Global AI Trade Shift

Indian IT stocks emerged as the strongest-performing sector in October, gaining approximately 18 per cent over the month. Analysts point to a combination of weakness in the global AI trade and more attractive stock valuations as primary drivers for the rally.

During the same period, the Nifty 50 gained 1.91 per cent, while broader market-cap indices declined, according to data from Motilal Oswal. The IT sector led the market ahead of healthcare and bank services, posting a monthly gain of 17.69 per cent.

Brokerage firms, including BNP Paribas, noted that IT services companies reported September-quarter results that were slightly ahead of estimates. Collectively, 60 per cent of firms beat revenue estimates, while 53 per cent surpassed EBIT margin expectations.

Nomura noted that relative sentiment towards Indian equities among foreign investors is expected to improve, which could drive portfolio flows in the near term. This outlook is supported by low starting expectations, a correction in AI stocks, and the Nifty outperforming AI-heavy indices in Korea, Taiwan, and the Nasdaq. Additional supportive factors cited by Nomura include a possible LTCG cut for foreign institutional investors, falling global yields, and expectations that the INR will hold up following central bank intervention.

Industry experts have offered varied perspectives on the shift. Yugal Joshi, Partner at Everest Group, stated that the market is sentiment-driven and valuations have become attractive, noting that reasonable pricing often serves as a trigger for buying after a losing streak.

However, Greyhound Research presented a more cautious view, arguing that the AI trade reversal is only one factor behind the renewed interest in Indian IT and may not accurately reflect underlying business performance. The research firm noted that the trend does not fully explain client activity, which remains level.

Sanchit Vir Gogia, Chief Analyst and Founder at Greyhound Research, added that a rally built on falling AI stocks treats Indian IT as a business hurt by artificial intelligence, whereas AI already accounts for over a tenth of revenue at firms like TCS and Infosys. Gogia pointed to the upcoming December-quarter results as the next key test to determine whether bookings convert into sequential growth above 2 per cent across the four largest firms.

"The recent surge in Indian IT stocks highlights how shifting global market dynamics and valuation corrections can rapidly alter investor sentiment. While a cooling global AI trade has directed fresh attention toward Indian IT services, long-term stability will depend on sustained client activity and actual execution. Investors and business leaders should look beyond short-term rally triggers and closely monitor upcoming quarterly results for concrete signs of sequential growth and robust deal conversions." — Dr. Shishir Gupta, Founder & CEO, StartupLanes