Indian IT Stocks Rise 2.6% as LTTS Jumps 15%

The short version

• L&T Technology Services shares climbed as much as 15% as Indian IT stocks advanced.
• Strong quarterly results and Jefferies' valuation assessment supported buying across the sector.
• Infosys and TCS could see valuation gains if earnings growth holds, but AI spending risks remain.

Indian IT stocks advanced on October 21, with L&T Technology Services (LTTS) leading the gains after reporting higher revenue and profit for the September quarter. The Nifty IT index rose as much as 2.6% to an intraday high of 32,348.25, while the Nifty 50 gained around 1%.

Buying extended across the sector, with Wipro, Infosys, Tata Consultancy Services (TCS) and other IT companies trading higher. Investors responded to quarterly earnings and renewed expectations of technology spending, while brokerage Jefferies outlined conditions under which valuations could recover.

The rally came as investors assessed whether IT companies could maintain revenue growth despite uncertainty over artificial intelligence (AI), global technology budgets and the pace of business recovery.

IT stocks rally across the sector

LTTS led the advance with an intraday gain of up to 15%. Wipro rose 4%, while Infosys, TCS, Tech Mahindra, HCL Technologies and Mphasis gained between 2% and 3.5%. Persistent Systems, LTIMindtree and Coforge also advanced more than 1% each.

The gains across all Nifty IT constituents suggested that buying extended beyond companies reporting individual results. The sector index also outperformed the broader market, as the Nifty 50's gain was smaller than the IT index's advance.

Stock or index	Reported market movement
Nifty IT	Up to 2.6%
Nifty 50	Around 1%
L&T Technology Services	Up to 15%
Wipro	4%
Infosys, TCS, Tech Mahindra, HCL Technologies and Mphasis	2% to 3.5%
Persistent Systems, LTIMindtree and Coforge	More than 1%

These are intraday movements reported for October 21, not closing returns. Share prices can change during a trading session.

The rally followed a positive start to the September quarter earnings season. TCS and HCL Technologies had also delivered results above expectations, easing some concerns about technology spending. For context, earlier coverage of IT stocks rising amid easing AI spending fears examined a similar driver of sector sentiment.

LTTS results support the rally

L&T Technology Services reported higher revenue and net income for the second quarter of FY27, covering the July to September period. Its results showed growth in both rupee and dollar revenue, alongside a sharp increase in net income compared with the previous quarter and the same quarter last year.

LTTS financial metric	Q2 FY27 figure	Growth
Revenue	Rs 3,040.4 crore	3.4% QoQ, 12.1% YoY
Dollar revenue	$317 million	2.7% QoQ, 4.8% YoY in constant currency
Net income	Rs 548.2 crore	53.7% QoQ, 66.8% YoY

QoQ means quarter on quarter. YoY means year on year.

Net income grew faster than revenue during the quarter. The results helped LTTS attract buying interest, although the supplied figures do not establish how much of the share price gain came directly from earnings or how much reflected broader sector sentiment.

Investors will also assess whether the revenue growth continues in subsequent quarters. A single strong quarter does not establish the pace of future growth, particularly when technology clients are reviewing budgets and changing how they spend on AI and conventional IT services.

Jefferies sees scope for IT stock valuations to recover

Jefferies said Indian IT stocks could see a valuation re rating if companies continue delivering earnings growth despite weak macroeconomic conditions and changes in AI related spending. Its October 21 assessment argued that the earlier share price correction had already accounted for lower long term growth expectations in parts of the sector.

The brokerage maintained a selective approach. It identified Infosys and Sagility as attractive risk reward opportunities within their respective peer groups. Among large cap IT companies, it identified Infosys and TCS as the two stocks with potential for a valuation re rating under its assessment.

Jefferies raised its price targets for both companies while retaining cautious ratings.

Company	Previous target price	Revised target price	Rating
Infosys	Rs 1,020	Rs 1,160	Hold
TCS	Rs 1,800	Rs 2,125	Underperform

The higher targets do not amount to upgrades in the brokerage's ratings. Jefferies retained Hold on Infosys and Underperform on TCS, indicating that its assessment of potential valuation gains remained separate from its overall view of the shares.

Across large cap IT companies, the brokerage raised target prices by 14% to 18%. The changes reflected its revised assessment of valuations, while its stock selection remained selective.

For additional context on changing brokerage views, WeloMoney has also covered target price cuts for major IT stocks amid concerns about generative AI and pricing pressure.

What Jefferies' valuation scenarios indicate

Jefferies assessed how different long term growth outcomes could affect the valuations of Indian IT companies. Its analysis considered a pessimistic case in which companies fail to deliver growth beyond FY29 and an optimistic case in which they sustain the revenue growth trajectory recorded between FY21 and FY26.

The difference between these scenarios is significant because share valuations depend partly on expectations for earnings and growth over many years. If future growth falls short of what investors expect, valuation multiples may contract. If earnings remain resilient, investors could become more willing to pay higher multiples.

The brokerage's scenarios included the following estimates:

Valuation measure	Jefferies' assessment
Pessimistic scenario	12 to 13 times earnings if growth fails to continue beyond FY29
Optimistic scenario for Infosys and TCS	More than 20% potential valuation re rating
Sagility	More than 50% potential valuation re rating
Large cap IT implied revenue growth	0% to 9% CAGR
Mid cap IT implied revenue growth	6% to 14% CAGR
Difference from historical growth	Implied rates generally 2 to 4 percentage points lower

CAGR means compound annual growth rate. The growth figures in the valuation analysis refer to expectations implied by current valuations, not confirmed future revenue growth.

The potential re rating figures are scenario based estimates from Jefferies. They are not guaranteed share price returns, and the assessment depends on companies delivering the earnings and revenue growth needed to support higher valuations.

Sagility's estimated potential re rating was higher than that of Infosys and TCS in the optimistic scenario. However, the comparison involves companies of different sizes and should be read alongside the assumptions behind each valuation.

Why AI spending remains a concern

The outlook for Indian IT companies depends partly on how clients allocate technology budgets. Generative AI could change demand for traditional services and influence how technology contracts are priced. Investors are therefore assessing whether AI related changes will reduce revenue opportunities, improve productivity or lead to a combination of both.

Jefferies' assessment pointed to continued earnings growth despite weak macroeconomic conditions and AI related pressure on the sector. That resilience could lead investors to reconsider assumptions about long term growth.

However, the brokerage also warned that a deterioration in global AI capital expenditure sentiment could weigh on the sector. Companies could face further pressure if they fail to meet FY27 and FY28 growth expectations.

Traditional technology spending is another factor. Expectations of improving conventional IT expenditure, following Accenture's guidance for the next financial year, have helped support interest in established IT services companies.

The broader market also faces external risks. Elevated crude oil prices, high US bond yields and continued foreign investor outflows remain concerns. These factors can affect overall market sentiment even when individual companies report strong results.

Market analysis: earnings must support valuations

The October 21 advance showed how earnings announcements and changes in valuation expectations can influence an entire sector. LTTS led the gains after its results, while advances in other IT stocks suggested that investors were also responding to the broader outlook.

The distinction between earnings performance and valuation expectations matters. Revenue and profit are reported financial outcomes, while a valuation re rating depends on what investors are willing to pay for future earnings. Higher target prices alone do not confirm that a stock's market price will rise.

Jefferies' analysis suggests that valuations already factor in relatively modest organic revenue growth expectations. Large cap companies have implied constant currency revenue growth of 0% to 9% on a CAGR basis, compared with 6% to 14% for mid sized companies. Those expectations are generally below historical growth rates by 2 to 4 percentage points.

Whether this gap closes will depend on actual business performance. Revenue growth, margins and the ability to maintain client spending will matter more than a broad change in sentiment alone.

What investors should watch

The next set of quarterly results will help investors assess whether the improvement in earnings can continue. For LTTS, revenue growth and profitability will be important indicators after its strong September quarter performance. For Infosys and TCS, the gap between brokerage expectations and actual results will influence whether the proposed valuation re rating remains plausible.

Investors will also track the following developments:

• FY27 and FY28 revenue growth against company expectations.
• Client spending on traditional IT services and AI related projects.
• Earnings performance and margins across large cap and mid cap IT companies.
• Changes in US bond yields, crude oil prices and foreign investor flows.

The sector's recent gains do not establish a broad recovery on their own. Further results and company commentary will help determine whether earnings strength can support the valuation assumptions behind the rally.

Frequently asked questions

Why did Indian IT stocks rise on October 21?

Indian IT stocks rose on October 21 after strong quarterly results and a positive valuation assessment from Jefferies supported sentiment. The Nifty IT index gained as much as 2.6%, while LTTS shares rose up to 15%. Wipro, Infosys and TCS also advanced.

Why did LTTS shares rise up to 15%?

LTTS shares rose up to 15% after the company reported Q2 FY27 revenue of Rs 3,040.4 crore and net income of Rs 548.2 crore. Revenue increased 12.1% year on year, while net income rose 66.8%.

What are Jefferies' revised target prices for Infosys and TCS?

Jefferies raised its Infosys target price to Rs 1,160 from Rs 1,020 and its TCS target price to Rs 2,125 from Rs 1,800. It retained Hold on Infosys and Underperform on TCS, so the target price changes did not represent rating upgrades.

Can Indian IT stocks see a valuation re rating?

Indian IT stocks could see a valuation re rating if companies maintain earnings growth and meet expectations, according to Jefferies. Its optimistic scenario indicated more than 20% potential re rating for Infosys and TCS, but the outcome depends on future business performance.

What are the main risks for Indian IT stocks?

Indian IT stocks face uncertainty over AI related spending, traditional technology budgets and future revenue growth. Jefferies also flagged the risk of weaker global AI capital expenditure sentiment or companies missing FY27 and FY28 growth expectations.

What should investors monitor after the IT sector rally?

Investors should monitor quarterly revenue growth, margins, client technology spending and management commentary. Developments in crude oil prices, US bond yields and foreign investor flows could also affect broader market sentiment.