CLSA said that in its discussions with major IT firms including TCS, Infosys, HCL Tech and Wipro, the brokerage found no evidence of increased pricing deflation in contract renewals due to the latest AI tools from Anthropic and OpenAI.

CLSA dismissed concerns over AI-led disruption in Indian IT services, stating that there is no evidence of pricing pressure in client renewals despite the latest tools from Anthropic and OpenAI. The brokerage’s view helped drive a sharp rally in the sector on Wednesday, with the Nifty IT index surging over 4 percent and heavyweight stocks featuring among Nifty top gainers.

At 10:50 am, the Sensex was up about 600 points or 0.8 percent at 76,670, while the Nifty rose 180 points to 23,761, supported by broad-based buying across sectors. The Nifty IT index climbed 4.03 percent, emerging as the top sectoral gainer.

Frontline IT stocks led the rally. Tech Mahindra shares rose over 4 percent, while Infosys and HCL Technologies gained nearly 4 percent each. TCS stock advanced more than 3.5 percent and Wipro rose over 3 percent, placing five IT stocks among the top gainers on the benchmark index.

The rally followed CLSA’s discussions with major IT firms including TCS, Infosys, HCL Tech and Wipro, where the brokerage said it found no evidence of increased pricing deflation in contract renewals due to the latest AI tools from Anthropic and OpenAI.

The brokerage said that while some companies are seeing minor delays in client decision-making as enterprises assess new AI capabilities and navigate the ongoing Middle East crisis, deal pipelines remain strong. It also highlighted that direct revenue exposure to the Middle East is in low single digits for Indian IT firms, indicating limited immediate impact, while broader macro risks depend on how the geopolitical situation evolves.

Importantly, CLSA said sector valuations have corrected to around their 10-year average, making them more attractive after the recent decline. It named Persistent Systems and Coforge as high-conviction picks, while maintaining Outperform ratings on Infosys, TCS, Tech Mahindra and LTIMindtree, and Hold on HCL Tech and Wipro.

The positive brokerage commentary comes alongside improving sentiment toward the sector after a recent slide, with the Nifty IT index having fallen for six consecutive sessions prior to Wednesday’s rebound.

Adding to the optimism, Morgan Stanley said it expects a relief rally in Indian IT stocks ahead of the earnings season, highlighting largecap names such as Infosys and TCS as key beneficiaries.

The sector, which earns a large share of its revenue from the United States, is also in focus ahead of the Federal Reserve’s policy decision, where expectations of a rate pause are supporting sentiment.