Record Order Book, Robust Deal Pipeline and Rising Global AI Spending Lift IT Stocks; Sector Emerges as July's Best Performer

Indian information technology (IT) stocks extended their winning streak on Tuesday, with the Nifty IT Index rallying nearly 3% after Coforge Ltd. delivered a stronger-than-expected set of first-quarter results. The upbeat earnings, coupled with growing optimism around global artificial intelligence (AI) spending, sparked broad-based buying across the sector and reinforced expectations of a sustained recovery in India's technology space.

The Nifty IT Index climbed to 30,258.90 during intraday trading on the National Stock Exchange (NSE), marking its third consecutive session of gains. The index has advanced nearly 6% over the past three trading sessions and an impressive 15% in July, significantly outperforming the benchmark Nifty 50, which has risen just 0.6% during the same period.

The latest rally also represents an 18% rebound from the index's 52-week low of 25,699.10, touched on July 1, signalling a strong turnaround in investor sentiment after months of subdued performance.

Coforge Emerges as the Biggest Winner

Leading the rally was Coforge Ltd., whose shares surged as much as 7% after the company reported quarterly numbers that comfortably exceeded market expectations.

The company delivered 5.2% quarter-on-quarter organic constant currency revenue growth, substantially outperforming its earlier guidance of broadly flat growth. The strong performance reflected healthy execution across key business verticals and continued momentum in client spending despite an uncertain global economic backdrop.

The earnings announcement triggered fresh buying interest, pushing the stock to one of its strongest intraday gains this year.

Record Order Book Boosts Revenue Visibility

One of the biggest highlights of Coforge's June quarter performance was its exceptionally strong deal momentum.

The company reported:

• Order intake of $691 million during Q1 FY27.

• A record 12-month executable order book of $2.23 billion.

• 44% year-on-year growth in the executable order book.

These figures provide strong visibility for future revenue growth and demonstrate that enterprise demand for digital transformation projects remains resilient.

Large multi-year contracts continue to strengthen Coforge's long-term earnings outlook, particularly as businesses accelerate investments in cloud computing, automation and artificial intelligence.

Margins Stay Ahead of Guidance

Despite acquisition-related costs associated with the Encora acquisition, Coforge maintained healthy operational performance.

The company reported:

• EBIT margin of 16%, exceeding its FY27 guidance of 15.5%.

• Organic EBIT margin of 16.7%.

• Healthy free cash flow generation.

• Strong cash conversion supporting future expansion.

Although the company raised approximately $550 million in debt to fund the Encora acquisition, analysts believe the business continues to generate sufficient operating cash flows to comfortably manage future repayments while maintaining growth investments.

The successful operational integration of Encora is also expected to unlock cross-selling opportunities and strengthen Coforge's capabilities in digital engineering and AI services.

Brokerages Remain Optimistic

Brokerage firms responded positively to the quarterly performance, citing strong execution and robust business momentum.

ICICI Securities

ICICI Securities highlighted several positives:

• Record executable order book.

• Strong large-deal pipeline.

• Healthy operating margins.

• Increasing AI-driven opportunities.

• Improving revenue visibility.

The brokerage believes Coforge remains among the best-positioned mid-tier IT companies to sustain above-industry growth over the coming years.

Equirus Securities

Equirus Securities also viewed the results favourably, noting that revenue growth significantly exceeded expectations even though operating margins came in marginally below its internal estimates.

The brokerage highlighted:

• Robust free cash flow.

• Healthy quarterly order intake.

• A recently announced $230 million large deal with a five-year tenure.

These developments reinforce confidence that the company can continue delivering superior growth compared to industry peers.

Broad-Based Buying Across IT Stocks

The positive sentiment extended well beyond Coforge, resulting in a broad-based rally across India's technology sector.

Major gainers included:

• Mphasis – up nearly 5%.

• Tata Consultancy Services (TCS) – around 3%.

• Infosys – nearly 3%.

• Persistent Systems – about 3%.

• Tech Mahindra – approximately 3%.

• LTIMindtree – close to 3%.

The rally indicates renewed institutional interest in high-quality technology companies as earnings continue to exceed expectations.

July Turns into a Strong Month for IT Stocks

The information technology sector has emerged as one of the strongest-performing sectors in the Indian equity market this month.

Some of the notable performers include:

• Persistent Systems: Up 23–26%

• HCL Technologies: Up 23–26%

• LTIMindtree: Up 23–26%

• TCS: Up 17%

• Tech Mahindra: Up 16%

The sharp recovery suggests investors are becoming increasingly confident that earnings growth across the sector could accelerate during the second half of FY27.

Artificial Intelligence Continues to Drive Technology Spending

Another major catalyst behind the sector's rally is the rapid acceleration in global AI investments.

Industry estimates indicate that worldwide IT spending could rise to approximately $6.37 trillion in 2026, representing annual growth of over 14%.

Among the fastest-growing technology segments are:

• AI-enabled data centres.

• High-performance computing.

• Cloud infrastructure.

• Enterprise software.

• Infrastructure-as-a-Service (IaaS).

• Cybersecurity solutions.

Indian IT companies are expected to benefit significantly as global enterprises continue investing in AI deployment, cloud migration and digital transformation.

Large Enterprise Deals Support Long-Term Growth

Demand for large digital transformation contracts remains healthy across global markets.

Enterprises are increasingly investing in:

• Artificial intelligence implementation.

• Automation platforms.

• Cloud modernisation.

• Data analytics.

• Digital engineering.

• Customer experience transformation.

Indian IT firms continue to leverage their strong execution capabilities, global delivery models and deep technical expertise to win large, multi-year contracts.

This sustained deal momentum provides greater earnings visibility despite global macroeconomic uncertainty.

Risks Remain Despite Improving Outlook

Although sentiment has improved considerably, investors continue to monitor several key risks:

• Delays in discretionary technology spending.

• Higher wage inflation.

• Currency volatility.

• Integration risks from acquisitions.

• Rising financing costs.

• Global economic slowdown affecting enterprise budgets.

Nevertheless, analysts believe AI-led investments are likely to remain relatively resilient, helping offset weakness in traditional IT spending.

What Should Investors Watch Next?

Market participants will closely track upcoming quarterly earnings from major IT companies to determine whether the sector-wide recovery is sustainable.

Key indicators include:

• Order inflows.

• Margin expansion.

• AI-related deal wins.

• Client spending trends.

• Hiring outlook.

• Revenue guidance for FY27.

Strong commentary from management teams could further strengthen investor confidence and support higher valuations across the sector.

Market Outlook

The latest rally in Indian IT stocks reflects growing confidence that the sector is entering a stronger growth phase, supported by robust quarterly earnings, healthy deal pipelines and accelerating investments in artificial intelligence. Coforge's strong execution and record order book have reinforced the view that quality IT companies remain well-positioned to benefit from the next wave of digital transformation.

While global economic uncertainties and valuation concerns continue to warrant caution, sustained AI spending, improving enterprise technology budgets and resilient demand for digital services provide a favourable backdrop for the sector. If upcoming earnings from other IT majors confirm similar trends, the Nifty IT Index could continue to outperform the broader market in the coming quarters, making the sector one of the key areas of focus for long-term investors.