IT stocks staged a strong rebound on Friday, October 9, with shares of Tata Consultancy Services (TCS), Infosys, Wipro and other technology companies rising despite concerns over the US government's suspension of several firms from its green-card programme.
The recovery comes as investors reassess the immediate impact of the US restrictions, while bargain buying following the previous session's sharp market sell-off has added to the gains. TCS's September-quarter results, particularly the strong growth in its artificial intelligence (AI) revenue, have also boosted investor sentiment.
At 9:41 am, the BSE Sensex was trading at 72,195.25, up 602.01 points, or 0.84%. The Nifty 50 had gained 207.70 points, or 0.93%, to reach 22,439.50 at 9:46 am.
The Nifty IT index advanced 3.31% to 28,654.70, making it one of the strongest-performing sectoral indices in early trading.
TCS shares rose 4.62%, while Infosys gained 3.12%, Wipro climbed 3.31% and Tech Mahindra advanced 2.19%. LTM, Persistent Systems and Mphasis also traded higher, rising 3.62%, 3.33% and 3.15%, respectively.
WHY ARE IT STOCKS RISING DESPITE US GREEN-CARD RESTRICTIONS?
The US government has suspended several major technology companies, including TCS, Infosys, Wipro, HCLTech, Cognizant, Capgemini, Microsoft and Adobe, from the Permanent Labour Certification (PERM) programme, an important stage in the employment-based green-card process.
The move raised concerns about its potential impact on Indian IT companies with substantial operations in the US. However, clarifications from some companies have helped investors better assess the immediate consequences.
TCS said in a statement to stock exchanges on Friday that it did not expect the suspension to affect its US workforce strategy or customer engagements. The company added that the number of its PERM applications had remained in single digits over the previous two years.
TCS also reaffirmed its plan to recruit an additional 15,000 employees in the US over the next five years, stating that its workforce strategy was centred on hiring local talent.
Meanwhile, Microsoft said most of its H-1B visa petitions were filed for existing employees, according to a report by The Times of India. This clarification sheds light on the company's use of the H-1B programme, although it is separate from the PERM green-card process.
The distinction is important because the US action concerns permanent labour certification applications and does not constitute a blanket suspension of H-1B visas.
These clarifications may have eased immediate concerns about workforce planning. However, the longer-term impact will depend on how the restrictions and related investigations progress.
BARGAIN BUYING AFTER THURSDAY'S SHARP MARKET DECLINE
Bargain buying, commonly known as buying the dip, is another major factor behind Friday's recovery.
On Thursday, the Sensex plunged 1,045 points, or 1.44%, while the Nifty declined 1.64%. The sharp fall pushed the benchmark indices to multi-year lows and put several stocks under pressure.
When share prices drop significantly over a short period, some investors see an opportunity to purchase companies they believe are trading below their long-term earnings potential. Such buying can trigger a recovery even when underlying risks remain.
IT stocks are attracting this kind of interest as investors reassess the implications of the US announcement alongside company-specific developments. The sector's strong early gains indicate that some market participants are using the recent correction to build positions in stocks that have experienced steep declines.
However, bargain buying does not necessarily indicate that the market has reached its bottom. Some of the gains could reflect a technical rebound following the sharp sell-off, and volatility may persist if further negative developments emerge.
TCS Q2 RESULTS BOOST SECTOR SENTIMENT
TCS's September-quarter results, announced on Thursday, have provided another catalyst for the sector's recovery.
The company reported consolidated net profit of Rs 13,884 crore for the second quarter of FY27, an increase of approximately 15% from Rs 12,075 crore in the corresponding period last year. Revenue rose 11.2% year-on-year to Rs 73,188 crore.
The performance of its AI business was a key highlight. TCS's annualised AI revenue climbed nearly 20% quarter-on-quarter, reaching $3.1 billion from $2.6 billion in the previous quarter. AI revenue also crossed 10% of the company's total revenue.
TCS reported a total contract value of $9.6 billion during the quarter. International revenue increased 1.2% sequentially in constant currency terms, while banking, financial services and insurance, manufacturing, and technology and services were among the segments contributing to growth.
However, the results were not uniformly strong. Revenue increased only 0.5% sequentially in constant currency terms, indicating that overall demand remains subdued despite the momentum in AI-related business.
The results have therefore supported investor confidence, but market participants will continue to assess whether rising AI revenue can translate into stronger overall growth in the coming quarters.
CRUDE OIL PRICES AND FOREIGN INVESTOR SELLING REMAIN CONCERNS
Despite Friday's rebound, several risks continue to weigh on the broader market.
Foreign institutional investors (FIIs) have continued selling Indian equities, while elevated crude oil prices and high US bond yields have affected market sentiment. These factors can put pressure on the rupee, increase corporate costs and weigh on stock valuations.
Dr V K Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, said elevated crude prices and US bond yields had shifted the near-term market environment towards a “sell on rally” strategy.
He said FIIs had sold equities worth Rs 36,210 crore through exchanges in October so far and could continue selling in the near term amid prevailing market headwinds.
Vijayakumar also noted that the ongoing correction had created opportunities for patient, long-term investors to accumulate high-quality stocks at more attractive valuations.
Crude oil prices eased in early trading on Friday. Brent crude fell 1.31% to $102.91 per barrel, while US West Texas Intermediate declined 1.14% to $90.45, according to market data available at the time.
For now, IT stocks are benefiting from company clarifications, strong AI revenue growth at TCS and bargain buying following the recent correction. However, the rally's sustainability will depend on whether global risks subside and earnings growth strengthens across the technology sector.
