IT stocks surged on Tuesday amid a broader rally in the Indian stock market today after US President Donald Trump announced that India and the United States have reached a trade agreement. As part of the deal, reciprocal tariffs on Indian goods will be reduced to 18%, a sharp cut from the earlier proposed 50%, significantly easing concerns for export-oriented sectors.
Persistent Systems, Coforge, Infosys, Mphasis and Oracle Financial Services Software shares emerged as the top gainers in the Nifty IT index. Heavyweights such as HCL Technologies, Tata Consultancy Services (TCS), LTIMindtree, Wipro and Tech Mahindra also recorded strong gains, driving the Nifty IT index up by nearly 6%.
The positive sentiment surrounding the India–US trade deal triggered a sharp rally across the equity markets, with the benchmark Sensex and Nifty 50 jumping about 4%. Sectors with high exposure to the US economy led the gains, as improved trade visibility boosted investor confidence.
The India–US trade deal comes on the back of the recently announced India–European Union Free Trade Agreement (FTA), further strengthening India’s external trade outlook.
Market participants believe the latest development will allow investors to refocus on the improving trajectory of corporate earnings growth. Earnings have shown sequential improvement over recent quarters, supported by a favorable revision trend.
IT Sector Outlook
India’s information technology companies derive a significant portion of their revenues from the US, and easing trade tensions between the two countries is expected to further lift sentiment in the sector.
Improved visibility on client spending and deal momentum from US-based customers could support growth for Indian IT firms.
All IT stocks, including Infosys, TCS, Persistent Systems, Coforge and others, stand to benefit from the India–US trade deal as sentiment revives after setbacks linked to visa-related issues and negative perceptions around outsourcing. Deal momentum from US clients is also expected to improve, Motilal Oswal Financial Services said.
For India’s IT sector derives over 50% of its revenue from North America, market expert Avinash Gorakshakar believes that this deal provides much-needed macro-predictability.
“Although, we all know, IT services are generally exempt from direct merchandise tariffs, the broader trade normalization is a major sentiment booster. The deal reduces the risk of ‘tit-for-tat’ protectionism that threatened to compress enterprise tech budgets. Regards IT stocks, they remained oblivious of the recent rally witnessed in broader markets. I see IT stocks remain fundamentally attractive,” said Gorakshakar.
Prashanth Tapse, Senior VP (Research), Mehta Equities Ltd notes that it would be premature to take a blanket positive outlook on the Indian IT sector purely on the announcement of the India–US trade deal.
“While headline sentiment is supportive, the real impact will depend on the fine print of the agreement, particularly provisions around services trade, data localization, visa and mobility norms, taxation of digital services, and regulatory alignment,” said Tapse.
Until these details are fully assessed and translated into client spending behavior, he believes the sector’s fundamentals will continue to be driven more by US enterprise IT budgets, discretionary spending recovery, and execution on AI-led transformation rather than the trade deal alone, suggesting a selective and stock-specific approach over broad-based optimism.
Mohit Gulati, CIO and managing partner of ITI Growth Opportunities Fund has said his outlook on Indian IT sector remains structurally negative in a generative-AI world.
“The traditional labor-arbitrage model is being disrupted as GenAI compresses billable hours, automates large parts of coding, testing and maintenance, and shifts client spend away from people-led services toward platforms and outcomes. This is a structural reset, not a cyclical slowdown,” said Gulati.
According to him, only a narrow set of IP-led Indian IT companies are better positioned — such as TCS (BaNCS, Quartz), Infosys (Finacle), Persistent Systems, L&T Technology Services, and KPIT Technologies as these firms benefit from proprietary platforms, deep domain software, and outcome-based pricing.
“For the rest of the sector, scale of headcount is no longer an advantage — IP ownership and productivity per engineer will determine who protects margins and who becomes a low-growth utility,” Gulati said.
IT Stocks To Watch
According to Tapse, key IT stocks to watch as bellwethers of this thematic and market sentiment include large-cap names with deep US footprints such as Infosys, Tata Consultancy Services (TCS), HCL Technologies, and Tech Mahindra, alongside select mid-cap plays like Mphasis, Coforge and Persistent Systems, which have shown strong leadership in digital and niche services and could outperform if IT discretionary spend recovers.
He believes HCL Technologies and Tech Mahindra offer strong value on a price-to-earnings basis, while mid-cap players like eClerx Services and Mphasis appear “cheap” relative to their historical growth multiples and cash-flow generation.
Budget Impact
The recently announced Union Budget 2026-2027 contained a few provisions relevant to the IT services industry. These include a change in the taxation policy treating buyback proceeds as capital gains. Analysts believe this is a marginal positive for shareholders and may support buyback activity in the IT sector.
“A downward revision of safe harbor margins and broader thresholds simplifies compliance, but is largely an administrative update and a tax holiday for foreign companies using data center services provided by Indian entities for providing cloud services globally makes the Indian data center ecosystem marginally more lucrative for foreign firms,” said Kotak Institutional Equities.
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