IT rebounds, but AI clouds large-cap outlook

After a rough start to the fiscal, IT stocks have staged a recovery. The Nifty IT index has risen nearly 9% from its July 1 low of 25,770 to 28,136, even as the Nifty 50 has fallen about 5% over the same period. But analysts are not convinced that the worst is over.

Sumit Pokharna, SVP–fundamental research at Kotak Securities, said the recent outperformance largely reflects buying after the sharp correction earlier in the fiscal had priced in much of the bad news. Earnings growth, however, could remain muted in the second quarter and over the next two quarters of FY27, he said.