Expectations of a slowdown in AI adoption amid uncertainty surrounding the West Asia war, along with cheap valuations and oversold conditions, are driving the repositioning, analysts said.
“The renewed bullishness appears to reflect expectations linked to the West Asia conflict, which has pushed up energy prices,” said Rajesh Palviya, head of Technical and Derivatives Research at Axis Securities. “As data and energy are critical inputs for AI development, this could ease some of the competitive pressure that AI has posed to Indian IT companies in recent months.” Infosys, HCL Technologies and Wipro will report earnings later in April.
The Nifty IT index rose 2.5% on Tuesday, making it the top sectoral gainer. The Nifty ended 0.7% higher at 23,123.65.
Mphasis surged 4.2%, followed by Wipro and LTIMindtree, which gained 3.4-3.7%.
Contrary to previous expectations, traders have been creating bullish derivative bets on IT stocks.
“Majority of the IT stocks moved higher on Tuesday on long buildup,” said Vipin Kumar, AVP – derivatives and technical research at Globe Capital Market, referring to Mphasis, HCL Technologies, KPIT Technologies and Infosys. “In the first four trading sessions of the April series, IT stocks moved higher through a mix of long buildup and short covering.” From its recent low of 28,288 on March 17, the Nifty IT index has gained over 11% compared with the 2% decline in the Nifty.
AgenciesTraders Trim Bearish Bets, Add Fresh Long Positions
“This recovery has been supported by visible short covering in midcap IT stocks, while large-cap IT names are witnessing fresh long buildup, indicating improving participation and strength across the sector,” said Sudeep Shah, head – Technical and Derivative Research at SBI Securities.
Ahead of the December quarter results, the sector had seen heavy bearish positioning amid earnings downgrades and volatility following the launch of new tools by Anthropic. This time, the recovery appears to be driven by a mix of technical and fundamental factors.
“Following the recent correction, the market appears to be gradually reassessing the space,” said Sagar Shetty, research analyst at StoxBox. “Large-cap players such as TCS and Infosys, supported by strong balance sheets, remain better positioned to invest in AI capabilities and navigate this transition.” With valuations now more attractive after the decline, IT is increasingly being viewed as a contrarian opportunity, prompting traders to unwind short positions, according to Shetty.
Short-term technical indicators are pointing to bullishness with the Nifty IT index moving above its 20-day exponential moving average for the first time since February 2026, said SBI’s Shah.
TCS’s earnings commentary will be crucial to confirm investors’ newfound confidence in the sector. “As TCS kicks off the earnings season, its commentary will be critical in shaping market expectations, with peers reporting results over the following weeks,” Shetty said.