Indian IT Stocks Rally as Global AI Trade Cools
Indian IT services stocks surged in July 2026 as investors shifted capital from volatile global AI chip stocks toward undervalued domestic software firms.
The Nifty IT index surged 16% in July 2026, marking a sharp recovery after a period of institutional pessimism that left nine of the ten index stocks with negative annual returns. This rally peaked on July 29, when the BSE Sensex rose over 800 points to 77,559.48 and the NSE Nifty climbed above 24,200. The rebound was driven by an anti-AI trade reversal, as investors moved away from US technology stocks—which lost $1.6 trillion in market value over five days—and toward beaten-down Indian IT services firms trading at near five-year lows.
Jefferies Financial Group Inc ended its underweight position on the sector, upgrading it to neutral and adding Infosys and Coforge to its model portfolio. Other major players like Tata Consultancy Services and HCL Tech also saw significant gains. This shift was supported by a return of foreign institutional investors, who became net buyers in July after withdrawing over $3.5 billion during the first half of the year.
Despite the rally, structural concerns persist. Analysts from JM Financial and Kotak noted that macro uncertainty, subdued discretionary spending, and AI-led productivity gains continue to pressure pricing. While some firms like Samco Securities viewed the low valuations as a buying opportunity, others, including HDFC Asset Management Company, maintained minimal allocations due to these long-term AI risks.
