Infosys, Wipro ADRs rebound 4% after losing 14% in two days. Time for a rally on Monday?

After a brutal two-day sell-off that saw Infosys and Wipro ADRs fall as much as 14.5%, Friday’s session brought a much-needed breather. The bargain hunt started at lower levels, leading to a sharp rebound as Infosys rose 4% while Wipro rose 3%, helping both stocks end the week on a much stronger note.A whopping Rs 5.7 lakh crore evaporated from the sector in just eight trading sessions and the Nifty IT index crashed 19% in a short span of time. The sale wasn’t limited to these two; IT sector fell to a five-year low on Friday. Coforge, LTIMindtree, HCL Tech and Mphasis also fell to 4%.

The bearish sentiment stemmed from US artificial intelligence startup Anthropic, which earlier this month unveiled a new tool designed specifically for corporate legal teams. Anthropic, the company behind the Claude chatbot, said the product is capable of automating several legal functions, including contract reviews, non-disclosure agreement triage, compliance workflows, legal short-term preparation and standardized responses.Planning a rally on Monday?

Global brokerage firm JP Morgan has a message for panicked investors: IT services companies are the indispensable “plumbers of the tech world” and their dividend yields have now reached levels last seen only during the global financial crisis and COVID-19.

With Rs 5.7 lakh crore evaporating from the sector in just eight trading sessions and the Nifty IT index crashing 19% in a short space of time, the Wall Street giant is turning contrarian and declaring ‘deep value’ buying opportunities at bloodied whistleblowers Infosys and TCS.

While AI tools like Claude Cowork are fueling fears of large-scale disruption, JP Morgan argues that someone still has to make enterprise software actually work and that’s where Indian IT services remain irreplaceable. Free cash flow/dividend yields scream great value and exceed levels previously seen during market dislocation events such as GFC and COVID, the analysts wrote, recommending a “barbell approach to buying big value in large caps” with overweight ratings on Infosys and TCS, besides growth champions Persistent Systems and Dexterity.

With the sector trading at valuations previously only seen during major market crises, JP Morgan’s scenario analysis suggests that even in bear cases there is limited further downside, while any marginal recovery in growth could provide significant upside potential.

“I believe things don’t look as bad as they sound. On the contrary, for most IT companies, it is a new birth, a new business, a new environment in which they are likely to thrive in the near future,” Deven Choksey, MD, DRChoksey FinServ told ET Now.

He added that Indian IT companies have positioned themselves strongly for this new business model. In the past, most companies charged their customers on a time-and-cost basis, but today there is a shift toward results-based pricing – and customers are increasingly willing to pay for measurable results. This change is largely due to the adoption of AI, which allows companies to save time, reduce costs and deliver solutions faster. While agility-based development defined the previous phase, AI-led development is quickly becoming the new normal. As companies move from time-based billing to results-based revenue models, many Indian IT players are likely to win larger and more strategic deals, especially as the business environment continues to evolve at a rapid pace.

(Disclaimer: Recommendations, suggestions, views and opinions expressed by the experts are their own. These do not represent the views of The Economic Times)