Motilal Oswal turning constructive on Indian IT marks a shift in market expectations as valuations stabilise, global tech spending improves, and AI-led services begin to drive a new demand cycle.

Why Are Major IT Stocks Witnessing Fresh Upgrades in the Emerging AI Cycle?

The latest round of upgrades by Motilal Oswal across Infosys, Mphasis, Zensar and Wipro reflects a broader acknowledgement that Indian IT’s earnings cycle may be bottoming out. The brokerage has revised its stance due to improving deal traction, the revival of digital transformation work, increased activity in AI-led consulting, and enhanced visibility on cost optimisation mandates from global clients. These shifts have begun to translate into healthier pipelines for companies with strong capabilities across cloud, data engineering, cybersecurity, and enterprise platforms.

At a broader level, Motilal Oswal’s revision reflects rising conviction that Indian IT will benefit disproportionately from the next leg of global tech modernisation. Over the last decade, enterprises invested heavily in cloud infrastructure, but the utilisation of these investments is now shifting toward AI-powered automation, predictive analytics, hyper-personalisation, and cost-aligned digital operating models. Indian IT companies, with their scale, delivery efficiency, and domain expertise, stand at the centre of this transformation.

As emerging technologies mature, demand for large programs involving platform upgrades, AI solution integration, data modernisation, cloud migration, cyber-resilience and digital customer journeys is expected to rise. This opens room for IT firms to capture higher-value deals and improve margin resilience. Further, the rupee’s trajectory, stable offshore salary costs, and expanding global capability centres across India support long-term competitiveness and profitability.

On the investor side, valuations remain reasonably attractive. The Nifty IT index still trades below historical averages despite the emerging recovery narrative. Such conditions often create favourable risk-reward setups, especially when earnings upgrades align with improving business micro-fundamentals. The recent upgrade wave, therefore, can be interpreted as the early stage of a multi-quarter bottoming process where growth visibility begins to improve before financial performance fully reflects the same.

Equally important is the divergence within the sector. While large-caps such as Infosys and Wipro focus on enterprise-scale transformation mandates, mid-caps such as Mphasis and Zensar continue to benefit from niche competencies and faster execution cycles. The combination of both segments experiencing upgrades reinforces the broader health of the IT landscape. The evolving global scenario also supports this view—hyperscalers have shifted away from heavy infrastructure capex, redirecting budgets toward AI-driven application modernisation, cloud productivity tools and managed service partnerships, which align strongly with Indian IT’s core strengths.

In the coming quarters, deal conversions, hiring trends, subcontractor costs, margin movement, BFSI spending patterns, US consumer sentiment, and European enterprise confidence will remain decisive variables. Yet, the forward guidance across firms suggests improving stability. The interplay of conservative valuations, stable pipelines and rising AI adoption underlines a meaningful opportunity for long-term investors.

From a macro perspective, Indian IT also benefits from structural elements: strong balance sheets, high cash generation, diversified global footprints, recurring annuity revenues, and multi-year client relationships. These factors provide downside protection during volatile cycles and position the industry well for secular growth themes. Motilal Oswal’s upgrade, therefore, signals a noteworthy turning point for the sector.

Meanwhile, portfolio strategists observing allocation shifts may interpret this upgrade as a potential sectoral leadership rotation candidate in the coming quarters, especially as domestic markets consolidate around all-time highs. If earnings deliver as expected, Indian IT may regain strategic importance among diversified institutional portfolios.

To summarise, the upgrade wave across Infosys, Mphasis, Zensar and Wipro sets the tone for a more constructive outlook on Indian IT. With global tech spending in a transitional phase and AI adoption accelerating, the industry’s inherent strengths—scale, cost advantage, and execution quality—could drive multi-quarter recovery. Investors should remain watchful of deal flows, margin movement and macro headwinds, but the medium-term view appears increasingly encouraging.

In this context, those evaluating long-term opportunities may examine companies with strong digital capabilities, visible pipelines, diversified client portfolios and the ability to execute complex transformation programmes. Select large and mid-caps, as highlighted in the latest upgrade, meet these criteria and could benefit from favourable tailwinds in the evolving technology landscape.

For those actively tracking momentum, it is equally vital to monitor global economic indicators, client commentary, technology budget surveys and emerging AI deployment patterns. These will shape the direction, pace and durability of the recovery. The current inflection point provides an important reference window for investors identifying strategic positions across the IT services universe.

In the near term, market volatility may persist as cyclicals, financials and defensives compete for leadership. Yet, the IT upgrade narrative enhances the underlying conviction that the worst of the cycle may be behind the sector—offering a potential platform for sustained, long-term growth in an increasingly digital-first global economy.

For active traders seeking directional clarity, maintaining a disciplined approach, tracking sector sentiment, and focusing on risk-reward setups remains essential. As IT stocks begin to display improved resilience, trend-following strategies may offer attractive opportunities during periods of market consolidation.

At the same time, long-term investors must focus on fundamentals rather than short-term price movements. Companies with robust order books, strong cash flows, scalable delivery networks and deep client relationships are positioned to outperform as the new digital cycle strengthens. The combination of value, visibility and structural demand reinforces the sector’s appeal across varied market environments.

The medium-term tailwinds driven by improving enterprise confidence, accelerating AI adoption and market-friendly macro dynamics offer a supportive backdrop. The latest upgrades suggest that investors should watch the sector closely, as the coming quarters may mark the early stages of a meaningful transformation in both operational performance and market positioning.

For broader portfolio construction, IT services can offer diversification benefits, stable cash flows and secular exposure to digital transformation themes. As AI reshapes industries, Indian IT’s relevance is expected to grow—not diminish—making these upgrades particularly significant in the current cycle.

The outcome of these changes will depend on execution excellence, client engagement, innovation, and the ability to manage cost structures effectively. Companies that excel on these metrics are well placed to deliver superior long-term returns. The Motilal Oswal upgrade serves as a timely reminder that opportunities often emerge when the cycle begins to turn, and the market is yet to fully recognise the shift.

For investors tracking market setups, understanding sector rotation becomes even more effective when combined with disciplined trading strategies such as a Nifty Options Strategy that aligns with prevailing trends.

The peer comparison table highlights the significant shift in sentiment toward the sector. Large-cap and mid-cap upgrades together signal broad-based improvement in structural fundamentals. This balanced movement is typically observed during early stages of sector-wide revivals, where leadership and breadth expand simultaneously. The relative pricing, valuation discounts and risk-adjusted growth expectations all contribute to improved confidence for institutional and retail investors alike.

These strengths provide stability across cycles, while weaknesses highlight areas requiring continuous improvement. Firms that successfully navigate these factors tend to generate sustainable returns for shareholders and gain larger market shares during recovery phases.

Opportunities outweigh threats for companies with strong execution, competitive pricing and deep domain expertise. As global enterprises shift to AI-enabled operations, firms that scale their capabilities quickly will lead the next wave of IT growth.

Investor Takeaway

The latest upgrades signal a turning point for Indian IT. With AI adoption accelerating and global confidence stabilising, the sector appears ready for a multi-quarter recovery. Long-term investors may see this as an opportunity to evaluate high-quality companies with strong fundamentals, operational resilience and compelling valuations.

For a deeper understanding of market trends and disciplined trading approaches, investors can continue reading at Indian-Share-Tips.com, authored by Derivative Pro & Nifty Expert Gulshan Khera, CFP®.

Related Queries on IT Stocks

🔹 Why is Indian IT seeing upgrades this quarter?

🔹 What drives valuation rerating in IT services?

🔹 Which IT mid-caps benefit from AI adoption?

🔹 How does global tech spending impact Infosys and Wipro?

🔹 What is the long-term outlook for digital transformation deals?

SEBI Disclaimer: The information provided in this post is for informational purposes only and should not be construed as investment advice. Readers must perform their own due diligence and consult a registered investment advisor before making any investment decisions. The views expressed are general in nature and may not suit individual investment objectives or financial situations. Written by Indian-Share-Tips.com, which is a SEBI Registered Advisory Services.