Coforge, Infosys to TCS: IT stocks rally as US software stocks outperform SOX last night; Nifty IT index jumps around 3%

IT stocks today: IT stocks such as TCS, Infosys, HCLTech, Wipro, Tech Mahindra and Coforge jumped today, July 28, after a strong overnight rally in US-listed IT services and software companies, reflecting improving investor sentiment toward the technology sector.

Software stocks outperformed the Philadelphia Semiconductor Index (SOX) amid a broader market rotation where application software and tech firms saw strong follow-through gains while chipmakers faced a sharp correction and pullbacks.

The Nifty IT index rose around 3% to 29,535.20, extending gains for the second straight session. It ended a little less than 1% higher in the previous session.

Among global peers, Accenture climbed 4.8%, while EPAM Systems also gained 4.8%. Gartner advanced 5%, Globant rose 4%, and Cognizant added 3.5% during the US trading session. The broad-based gains in software and IT services stocks outperformed the Philadelphia Semiconductor Index (SOX), signalling renewed strength in software names that could provide positive cues for Indian IT stocks in Tuesday's trade.

Back home, all Nifty IT constituents were in the green. Cofore surged the most around 7%, followed by Mphasis, up around 5%. Meanwhile, LTM, Persistent Systems, Tech Mahindra, TCS, and Infosys rose over 2.5% each. Moreover, L&T Tech, HCL Tech and Wipro also added between 1% and 2% in today's deals.

Why are IT stocks rising?

The sharp rally in IT stocks is being driven by a combination of improving global risk sentiment, easing concerns over interest rates, supportive brokerage commentary and optimism around upcoming technology earnings in the US.

Investor appetite for technology shares strengthened after geopolitical tensions in the Middle East showed signs of easing. Iran indicated it would suspend attacks as long as the US avoided further military action, fuelling hopes that the conflict would not escalate further. The development triggered a sharp decline in Brent crude prices after oil had briefly surged above $100 a barrel last week, reducing concerns over persistent inflation and higher input costs.

The retreat in crude prices has also altered expectations for US monetary policy. With inflation risks appearing less severe, investors have pared back bets on another US Federal Reserve rate hike. According to CME FedWatch data cited by Reuters, the probability of a 25-basis-point rate increase at the Fed's policy meeting ending Wednesday has fallen to 33.7%, compared with 37.4% on Friday. Softer rate expectations tend to favour technology stocks, whose valuations are particularly sensitive to changes in interest rates.

Adding to the positive sentiment, global brokerage Jefferies upgraded the Indian IT sector to 'neutral' from 'underweight'. According to media reports, the brokerage believes the sharp correction in frontline IT stocks has made valuations more attractive, while the evolving "reverse AI trade" could create opportunities for IT services companies.

Investors are also awaiting quarterly earnings from several large US technology companies later this week. Strong financial performance and upbeat guidance from global tech majors could reinforce confidence in demand trends, providing an additional tailwind for Indian IT companies that generate a significant share of their revenue from overseas clients.

Disclaimer: This story is for educational purposes only. Please consult with an investment advisor before making any investment decisions.