IT Stocks Surge 5.22%, Markets Log Biggest Gain in Four Months

Indian equity markets experienced their most significant gains in four months, with the Nifty 50 and BSE Sensex posting their biggest advances since June 12. The Nifty50 climbed 1.6 per cent to 22,721.95, while the BSE Sensex rose 1.54 per cent to 73,033.81, positioning them as Asia's top performers with 46 Nifty 50 stocks recording advances. A key driver was the IT sector, where the Nifty IT index surged 5.22 per cent to 29,830.10, marking its largest single-day gain since May 12, 2025, with all ten constituent companies seeing price increases.

This robust performance in Indian IT stocks occurred amid a selloff in Asian chip markets, as investors shifted funds from Taiwanese markets following China's advancements in memory chip technology. South Korean semiconductor giants SK Hynix, the world's second-largest memory chipmaker, and Samsung saw their shares fall 10.09 per cent and 7.39 per cent, respectively. This decline was triggered by China's CXMT announcing plans for a next-generation server memory chip by the end of 2026, contributing to a 5.46 per cent drop in Seoul's Kospi index. India is increasingly viewed as an "anti-AI trade," benefiting from chip development advancements as its IT companies primarily sell services, not hardware. Morgan Stanley's Shawn Kim noted, "We think the easy money is past" in the memory-chip cycle, though some analysts suggest it is too early to declare an oversupply.

Domestically, strong financial results from HCL Technologies further bolstered the IT sector. The company's September-quarter net profit rose 21.2 per cent year-on-year to ₹5,132 crore, with revenue increasing 11.5 per cent to ₹35,620 crore. Operating margins expanded to 18.2 per cent, and advanced AI revenue jumped 78 per cent to $219 million, propelling HCL's stock price up 8.42 per cent. Beyond IT, other sectors also recorded significant gains, including Nifty MidSmall IT & Telecom (2.77 per cent), Realty (2.46 per cent), Consumer Durables (1.56 per cent), FMCG (1.40 per cent), Auto (1.23 per cent), and Metal (1.15 per cent). Pharma was the only major sectoral index that fell flat, down 0.01 per cent.

Market experts offered insights into the recovery. Somil Mehta, head of retail research at Mirae Asset Sharekhan, commented, "HCL results were pretty good, and the IT pack has been oversold... they bounced back very sharply. I'm expecting IT stocks to do really well in the near term." The Nifty Bank index also rose 1.03 per cent, led by IndusInd Bank (2.85 per cent) and YES Bank (2.01 per cent), with HDFC Bank up 1.29 per cent and ICICI Bank 1.51 per cent. In other financial news, Bandhan Bank surged 9.21 per cent on reports of potential investment from Abu Dhabi's IHC, and Shriram Finance gained 6.31 per cent.

Siddhartha Khemka, head of research - wealth management, Motilal Oswal, suggested, "Indian equities are likely to extend their recovery in the near term, supported by improving sentiment following India's Finance Minister Nirmala Sitharaman's remarks that the government is willing to hear stakeholders' views on removing LTCG tax." Despite these recent gains, the broader market context shows the Nifty currently down 0.24 per cent for the week, 2.89 per cent for the month, and 6.15 per cent for the last three months.

What to watch: Investors will monitor further developments in global chip markets and domestic policy discussions on capital gains tax.

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