The Nifty IT index added nearly 8% across three sessions through Tuesday, May 19, touching an intraday high of 29,566.15 with all ten constituents in the green. Year to date the same index sits 22% below where it opened January, and only one of those ten names is positive for the calendar year.
What the three-session move has not yet supplied is evidence of a demand turn. The drivers being cited this week (a softer rupee, valuations off their recent lows, a thinner-than-usual wage hike at Tata Consultancy Services) protect margins for the June quarter without confirming that client budgets are loosening. That confirmation, when and if it arrives, is the difference between a tradable rebound and a confirmed trend reversal.
The Three-Session Bounce in Numbers
- ~8% gain on the Nifty IT index across May 15 through May 19, a third straight up session for the sector.
- 29,566.15 intraday high on Tuesday, with the 50-day moving average sitting just above at 29,750.
- -22% year to date through May 19, with only one of ten constituents in the green for the calendar year.
- 10 of 10 Nifty IT names closed Tuesday’s session higher, led by Coforge and Mphasis with gains above 5%.
The heaviest weight in the index traded around ₹2,350 on Tuesday after a 2.9% gain. Infosys ran more than 4% higher to ₹1,191.20, while HCL Technologies added 3.43% to ₹1,185.90. Tech Mahindra and Wipro rounded out the larger-cap moves with gains of roughly 3.9% and 2.1% respectively. Persistent Systems climbed close to 3.8% to ₹5,130 and Coforge cleared ₹1,400.
Monday’s session set the tone, with the Sensex clawing back 1,135 points from intraday lows on a late IT-led push. The Tuesday extension carried the index against a 50-day moving average that brokers are flagging as the level a confirmed reversal needs to clear. Monday’s full session breakdown tracked the same names that led Tuesday’s print.
A Record-Low Rupee Is Doing Most of the Heavy Lifting
The headline driver is a currency story rather than a tech story. The rupee printed a fresh record low of 96.4375 against the US dollar during Tuesday’s session, up from 95.5825 only six trading days earlier. As of March 2025, the same pair sat at 85.53, meaning roughly 12% of depreciation has accumulated in just over a year.
That movement matters arithmetically at the top of the profit and loss statement. India’s largest IT services firms book the bulk of their revenue in dollars, euros, and pounds while their cost base sits in rupees. A 1% depreciation in the rupee against the basket adds roughly 30 to 40 basis points to operating margin for the top services firms before hedging effects. The 12% slide since early 2025 lands during a period when the same firms are guiding to revenue growth of 1.5% to 3.5% in constant currency, so even modest dollar-revenue growth converts into a flattering rupee print. Hedging programmes complicate the immediate translation: the largest firms hedge anywhere from six to twelve months forward at any given time, which dampens the quarter-on-quarter benefit and stretches the full margin tailwind across the next two to three reporting periods.
The catalyst this week is geopolitical. An unstable US-Iran ceasefire has lifted the dollar against most Asian currencies, and a Federal Reserve repeating its higher-for-longer rate signal has kept emerging-market currencies under pressure. Delhi’s four-lever response to the 96.20 print from the start of the week framed the same currency move as a policy headache; for the Nifty IT pack it is the single largest tailwind in this quarter’s revenue translation.
TCS’s 5% Hike Shifts the Margin Math
Tata Consultancy Services rolled out the annual increment letters for fiscal 2026 this week. The average came in around 5%, the narrowest in years, with A+ performers seeing double-digit raises of 10% to 13% and lower-band staff at 2% to 3%. Some employees have publicly flagged negative compensation revisions following the company’s cost-to-company (CTC) restructuring under India’s new labour codes.
Read against the firm’s own history the gap is striking. Average hikes ran in the 8% to 10% band through much of the past decade, with double-digit raises for stronger performers routine. The new mid-single-digit baseline lands in the same quarter that net hiring across the top five Indian IT firms slowed to 140,000 for FY26, off sharply from the prior year.
For the equity market the signal is operational discipline. With revenue growth running at roughly 3% to 4% across the top five and consensus pricing in further softness, holding margins above 20% requires the wage line to give. A 500 basis-point trim in average increments, applied to a roughly 600,000-strong India base, is the kind of lever that protects the margin guidance the sell side is still penciling in.
Whether peers at Infosys, HCL Technologies, and Wipro follow with similar restraint will decide if this is a company-specific move or a sector posture. The June-quarter results due from July onward give the first read.
The AI Question the Bounce Cannot Settle
The bigger overhang on the sector since January has been the question of whether agentic AI tools are about to cannibalise the application-development and infrastructure-services revenue that built the Indian IT model.
Through the first four months of 2026 the index shed roughly $26 billion in market value after fourth-quarter earnings from the two heaviest names disappointed on demand commentary and on what management teams described as a productivity impact from AI inside client deals.
Pankaj Murarka, founder and chief investment officer (CIO) of Renaissance Investment Managers, told Upstox News this week that the reading is incomplete.
AI will definitely change the industry, but Indian IT companies have adapted well to every major tech shift in the past.
Murarka argued that the more immediate drag is slower global technology spending rather than AI disruption itself, and that valuations have corrected enough to give the sector a recovery path if demand turns. The structural decoupling, though, is no longer a forecast. Net hiring at the top five Indian IT firms dropped 86% year on year in FY26, the first time in the industry’s history that revenue growth and headcount have come apart.
Infosys provided FY27 guidance for revenue growth of 1.5% to 3.5% in constant currency, with operating margin in a 20% to 22% band, in its fourth-quarter FY26 results filed with the SEC. Both figures sit below where the firm typically opens a fiscal year, and both presume client discretionary budgets stop tightening from here.
Where Valuations Sit After the 22% YTD Drop
The correction that preceded this week’s rally was concentrated by design. Four names, with Infosys close to 29% of the index, Tata Consultancy Services around 22%, plus HCL Technologies and Tech Mahindra together adding another 22%, make up more than 70% of the Nifty IT index composition disclosed by NSE. A rerating in any of them dominates the sector print, and through the first four-plus months of 2026 all four traded lower, taking the index down 22% for the year.
What that left behind is closer to a price-to-earnings reset than a temporary discount. Even after the recent decline the larger constituents are not on emergency-cheap multiples. The market’s verdict appears to be that the sector’s growth math itself has changed.
| Stock | Tuesday move | Tuesday price (₹) |
|---|---|---|
| Tata Consultancy Services | +2.9% | 2,350.60 |
| Infosys | +4.1% | 1,191.20 |
| HCL Technologies | +3.4% | 1,185.90 |
| Tech Mahindra | +3.9% | 1,484.50 |
| Wipro | +2.1% | 196.39 |
| Coforge | +5% plus | 1,405.70 |
| Persistent Systems | +3.8% | 5,130.00 |
What the Next Earnings Cycle Has to Prove
The chart picture has the index pressed against its 50-day moving average around 29,750 to 30,000, the technical band that brokers flag as the dividing line between a tradable rebound and a confirmed trend reversal. A clean close above that band would draw in the systematic money that has been short the sector since the January peak. Failing to hold above it would put the index back into the lower half of the correction range.
Earnings, not price action, decide which side prints.
- Q1 FY27 guidance discipline. Infosys reports the June quarter in July with its FY27 outlook attached. The current 1.5% to 3.5% constant-currency band is already cautious; a narrowing toward the lower end would reset the recovery thesis before it has time to compound.
- US BFSI (banking, financial services, and insurance) discretionary recovery. North American BFSI clients account for the largest single vertical for the top services firms. A pickup in discretionary project starts is the variable that converts the AI optimism Murarka described into actual total contract value (TCV, the headline measure of new-business momentum).
- Wage and headcount discipline holding. The 5% hike at the heaviest weight in the index has to be replicated across peers for the margin defence to read as sector-wide rather than firm-specific. The June-quarter results give the first read on whether that has happened.
If those three tests resolve positively through July, 30,000 on the index becomes a launchpad rather than a ceiling, and the year-to-date drawdown starts compressing back toward single digits.
If even one slips, this week’s snapback ends up looking like the kind of relief rally that punctuates correction phases without ending them.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Equity market positions in IT services stocks carry sector-specific risks including foreign-exchange exposure, demand cyclicality, and AI-driven margin pressure. Readers should consult a qualified financial advisor before making investment decisions. Prices and figures cited are accurate as of market close on May 19, 2026.
