By Dalal Street Investment Journal (DSIJ)
Nifty IT surged 3.81% on March 18, 2026, marking its sharpest single-day gain in 10 months, as valuation comfort emerged with the index PE trading below its 10-year median, offering a more favourable risk-reward setup. The Federal Reserve meeting now holds the key to further direction.
Indian equity markets extended their upward move on Wednesday, March 18, 2026, with the benchmark indices trading firmly in the green by early afternoon. As of 12:29 PM, the Nifty was up 0.78%, while the Sensex had gained 0.80%. The rally was led largely by information technology (IT) stocks, with Infosys emerging as one of the biggest contributors to the Nifty’s rise, adding nearly 38 points to the index after climbing more than 4%.
The day’s move marks a notable shift in market leadership, as IT stocks, which had been under sustained pressure in recent weeks, returned to the forefront with broad-based buying across the pack.
The Nifty IT index was the standout performer on Wednesday, rebounding sharply after six consecutive sessions of declines. As of 12:29 PM, the index had surged 3.81%, with every constituent trading in positive territory.
Among the strongest gainers were Coforge, Oracle Financial Services Software, Persistent Systems and Infosys, each rising more than 4%. Other major names such as Wipro, LTIMindtree, TCS, HCL Tech, Tech Mahindra, and Mphasis also posted healthy gains in the range of 2.68% to 3.96%.
This recovery is significant not only because of the breadth of participation but also because of the magnitude of the move. With Wednesday’s rally, the Nifty IT index recorded its sharpest single-day gain in 10 months. The last comparable surge came in May, when the index had advanced 6.70% in a single session.
The strength seen in IT stocks on Wednesday needs to be viewed against the backdrop of the sharp correction the sector witnessed just a few weeks earlier.
In February, the Indian IT index suffered a steep fall of nearly 20%, marking its worst monthly decline since September 2008. The sell-off was driven by growing concerns over artificial intelligence-led disruption, particularly the rise of agentic AI coding tools that many investors feared could begin to automate the core services on which Indian IT companies have built their business models.
The worry was straightforward but serious. If AI tools become capable of handling tasks such as coding, testing, analytics, and workflow execution at scale, then the traditional labour-intensive outsourcing model could come under pressure. That naturally raised concerns about pricing, margins, employee utilisation, and, over time, the relevance of entry-level staffing structures across large IT services firms.
Investor anxiety deepened after the launch of advanced AI agents by Anthropic, which were seen as a sign of how quickly automation capabilities were evolving. These developments heightened fears that Indian software services companies could face disruption sooner than expected, especially in areas where repetitive and process-driven work still forms a meaningful part of service delivery.
The market reaction was swift. Indian IT stocks saw heavy selling as investors began to reassess growth assumptions and valuation multiples in light of this emerging technological threat.
Sentiment turned sharply positive on Wednesday after the BBC reported that, amid the unease, Indian IT giants had sought to calm frayed nerves, saying the concerns were somewhat overstated. They argued that artificial intelligence would create new opportunities, even though there was little doubt that it would structurally change how things were done in the past.
Another factor supporting Wednesday’s rebound was valuation.
After the recent correction, sector valuations have moved below their 10-year median. The Nifty IT index is currently trading at a PE of 20.4x, compared with its 10-year median of 25.1x. This has made the space look more reasonable from a risk-reward perspective, especially for investors who were earlier hesitant to enter at richer valuations.
The IT sector’s movement also remains closely tied to developments in the United States, given that a substantial share of revenue for Indian IT companies comes from that market.
As a result, investors are also watching the Federal Reserve’s policy decision closely. The expectation is that the Fed will keep interest rates unchanged for now, while the first rate cut of the year is widely seen only in June, as per a Reuters poll. However, that view is being tested by concerns that any disruption in energy markets arising from the US-Israeli war on Iran could keep inflation elevated for longer.
For Indian IT companies, the Fed’s outlook matters because interest rates, business confidence, and global macro stability all influence technology spending decisions in key overseas markets, especially the US.
Wednesday’s sharp rebound in IT stocks suggests the market has found comfort in the view that valuations now present a favourable risk-reward setup.
That said, the broader debate is far from settled. Artificial intelligence will remain a defining theme for the sector, and investors will keep a close watch on how Indian IT firms adapt their delivery models, defend margins, and reposition themselves in a fast-changing technology landscape.
For now, the market seems willing to acknowledge that the correction had become excessive, and Wednesday’s rally reflects that reassessment.
SEBI Registered Research Analyst (INH000006396).
Founded in 1986, Dalal Street Investment Journal (DSIJ) brings decades of experience in India’s equity markets. DSIJ's research combines fundamental analysis with price action, guided by disciplined risk management and capital preservation. They follow a structured, data-driven approach designed to help investors and traders make informed decisions beyond short-term market noise.
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