Indian IT stocks advanced in Monday’s morning trade, lifting the Nifty IT index by 1.65 percent to 37,492.35, as investors priced in a higher probability of a December rate cut by the U.S. Federal Reserve. Four of the top six gainers on the Nifty were technology firms, setting the tone for the session.
At 09:40 IST, NSE Nifty 50 and BSE Sensex were trading just marginally higher from the previous close.
Tech Mahindra shares led the index with a 2.98 percent rise to Rs 1,505. This was followed by Infosys, which gained 2.3 percent to Rs 1,580.5. HCLTech climbed 1.83 percent to Rs 1,637.5, and TCS added 0.5 percent to Rs 3,166.5. InterGlobe Aviation and Hindalco also featured among the top Nifty gainers.
The gains tracked a jump in US Fed rate-cut expectations. The probability of a December cut has climbed to 70 percent from 44 percent a week earlier, according to CME’s FedWatch Tool. Odds of a U.S. rate cut in December rose after New York Fed President John Williams said interest rates could fall "in the near term". Lower U.S. interest rates tend to support American economic activity -- particularly technology spending -- and also increase the relative appeal of emerging markets such as India, aiding foreign inflows.
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Brokerage commentary added to the positive sentiment. Motilal Oswal Financial Services said the long-awaited AI services cycle may finally be nearing an inflection point, drawing parallels with the cloud investment surge of 2016-18. With the compute and infrastructure layer now largely in place, the brokerage expects incremental spending on AI and related services to accelerate.
Motilal Oswal said the IT sector appears to be at a bottom, with risks skewed to the upside. The brokerage upgraded its growth estimates to reflect an expected recovery that will show meaningfully in the second half of FY27 and gain full momentum in FY28. Motilal Oswal upgraded ratings on Infosys, Mphasis and Zensar to 'buy', while moving Wipro to neutral.
Motilal Oswal said that the AI services spending is expected to inflect from mid-2026 as the hardware-heavy phase of the AI capex cycle plateaus. The brokerage noted that improvements in chips and large language models have begun to flatten, similar to the cloud build-out period of 2016-18, when services demand accelerated once infrastructure stabilised.
It added that valuations are attractive, with the sector’s weight in the Nifty falling to a decade low despite its steady 15 percent share of index profits. Current prices already assume muted demand and GenAI-linked deflation, leaving room for upside if AI deployment gathers pace, the report said.
The brokerage expects IT services revenue growth to improve as enterprises shift spending from infrastructure to application modernisation, data engineering and integration. Early commentary from global peers such as EPAM and Globant also points to stabilising pipelines and the emergence of initial AI-integration work.
Motilal Oswal sees the next few months remaining soft due to furloughs and budget delays, but expects deal activity to pick up from mid-2026 and translate into revenue growth by 2HFY27. It projects sector-wide growth accelerating to 8-9 percent in FY28 as full-scale AI deployment begins.
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