Infosys, TCS, other IT stocks tumble up to 4% on profit booking after five-day rally; South Korea's Kospi jumps 17% on SK Hynix, Samsung gains

The Nifty IT index emerged as the worst-performing sector on Friday, falling 1.7% as investors booked profits after a five-session rally that had lifted the index nearly 17% in July, its strongest monthly gain in six years.

Sectoral heavyweights led the decline, with Tata Consultancy Services (TCS), the most valued IT stock, plummeting over 4% during the trade so far. Infosys, Tech Mahindra, HCLTech, and Wipro shares also dropped up to 3%.

Among others, Persistent Systems, Coforge, Mphasis, and LTIMindtree shares also dropped up to 2%.

Meanwhile, the equity benchmark Nifty50 was trading 0.2% higher at 24,367 levels, tracking firm cues from Asian peers.

South Korea's Kospi zooms 17%

In Asian market, South Korea's Kospi surged as much as 17%, registering its biggest single-day gain, led by more than 23% gains in semiconductor giants SK Hynix and Samsung Electronics, while Taiwan Semiconductor Manufacturing Co. (TSMC) advanced around 10%.

The rally followed strong earnings and continued AI investment commitments from global technology leaders, including Amazon and Microsoft, which reignited optimism around artificial intelligence spending.

Market experts, however, said the recent rebound in Indian IT stocks has been driven more by improving valuations and a sharp shift in investor sentiment than by any meaningful improvement in earnings fundamentals.

"The recent rebound in Indian IT stocks is largely in line with the recovery seen in global IT services companies, as investors rotated out of AI and semiconductor stocks following their sharp rally over the last five to six months," said Prasenjit Paul, Fund Manager at 129 Wealth Fund and Head of Equity Research at Paul Asset.

He noted that while the Nasdaq-100 has corrected around 11% from its June peak, the Philadelphia Semiconductor Index has fallen nearly 25% from its record high, highlighting growing investor concerns over whether the massive investments in AI infrastructure will generate sustainable returns.

"The same AI cycle is being viewed very differently across global and Indian markets. Global technology companies are facing questions over whether heavy spending on chips, data centres and AI infrastructure will deliver adequate returns. Indian IT companies, meanwhile, continue to grapple with concerns that AI could reduce billable effort, pressure pricing and weaken the traditional outsourcing model," Paul said.

According to him, investors now need to assess whether Indian IT has become an attractive valuation play compared with expensive global technology stocks or whether the recent rally has outpaced the sector's earnings outlook.

He also pointed out that the Nifty IT index is trading at around 20 times trailing earnings, significantly below the S&P 500 technology sector's valuation of around 32-33 times. However, he cautioned that the valuation discount reflects weaker near-term growth prospects and the risk of further earnings downgrades.

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