IT stocks surge as Trump signals progress in US-India trade talks

Mumbai: Information technology stocks extended gains Wednesday after Donald Trump said the US and India were actively negotiating trade terms and were close to a "successful conclusion", easing worries over potential tariffs on software exports.

Hopes for a rate cut by the US Federal Reserve later this month and optimism around Infosys' share buyback added fuel to the rally.

The Nifty IT index rose 2.6% to emerge as the top sectoral gainer on the NSE Wednesday, adding to the previous day's 2.8% jump on the Infosys buyback news. The benchmark Nifty 50 ended 0.4% up.

Oracle Financial Services jumped 10.5%, while Persistent Systems, Coforge and Mphasis gained 3.7-5.5%. Industry leaders Tata Consultancy Services, Infosys, HCL Technologies and Wipro rose between 1% and 3%.

"Improved valuations after recent corrections, optimism around a potential Fed rate cut and positive sentiment from ongoing US-India trade talks, including from President Trump's recent comments, have supported the IT sector," said Sumit Pokharna, vice-president, Fundamental Research, at Kotak Securities.

Agencies

Renewed Optimism
"Concerns around the HIRE Bill appear to be easing," he said.

Sentiment had soured after a Republican senator moved a bill, the Halting International Relocation of Employment Act (HIRE Act), in the US Senate on Saturday, proposing a 25% tax on US companies that outsource work abroad.

The legislation, if passed, would have a huge impact on the IT sector, given that US clients account for more than 60% of India's IT outsourcing revenue.

Services have so far been out of the tariffs imposed on Indian exports to the US. With a trade deal, such charges are likely to be avoided. IT shares have largely been beaten down this year, with Oracle Financial Services, TCS, HCL, Infosys, Coforge and Wipro down 15-28% in 2025 so far.

The rebound in IT stocks started on Tuesday after Infosys said on September 8 that its board would consider a share buyback on September 11.

"The previous buyback came at a 27% premium, and markets are expecting a similar around 25% premium this time, around ₹1,800-1,900," said Samco Securities analyst Harsh Thakkar. "This has fuelled optimism about undervaluation and raised expectations that other IT majors may follow with buybacks."

Infosys shares ended at Rs 1,532.60 Wednesday.

Pokharna also said the market may be seeing sector rotation of funds from the auto space, which has run-up recently, into attractively valued IT names.

Derivatives data suggested a covering of previous bearish bets and a fresh build-up of bullish positions in select stocks on Wednesday.