Markets Drift as IT Stocks Eye AI Signals

India’s equity markets are poised for a cautious start, reflecting a broader wait-and-watch mood among investors. After a volatile stretch driven by earnings and artificial intelligence concerns, traders are now looking for clearer signals-particularly from the technology sector and global developments.

With earnings season largely matching expectations and global cues muted, Dalal Street appears set for a phase of consolidation rather than sharp directional moves.

Futures Signal Mild Dip at Open

Gift Nifty futures were trading at 25,624.5 points at 7:54 a.m. IST, indicating that the benchmark Nifty 50 could open slightly below Monday’s close of 25,682.75.

Both the Nifty and the BSE Sensex rebounded about 0.8% in the previous session, trimming losses from a two-day decline that had shaved nearly 2% off the indices. Monday’s recovery was led by heavyweight stocks such as HDFC Bank and Reliance Industries, whose gains helped offset pressure in information technology shares.

The broader tone, however, remains measured rather than bullish.

Earnings Season Ends on a Stable Note

Corporate earnings for the December quarter have largely met market expectations, offering a degree of stability after weeks of stock-specific volatility.

Nifty 50 companies reported year-on-year profit growth of 7.5% in the December quarter. The broader BSE 500 index performed better, posting a 16% rise in earnings despite absorbing a one-time impact from the government’s new labour code implementation.

Siddhartha Khemka, head of research for wealth management at Motilal Oswal Financial Services, said the earnings cycle has ended on a firm footing. He expects markets to trade within a narrow range, albeit with a slight positive bias.

According to Khemka, the earnings performance provides a cushion for equities, but investors may refrain from aggressive positioning until new catalysts emerge.

IT Stocks Await Direction From AI Events

The information technology sector remains in focus as investors weigh the long-term implications of artificial intelligence on traditional software business models.

The Nifty IT index edged up 0.2% on Monday. However, the sector had suffered a steep 8.2% drop last week—its worst weekly performance in 10 months—amid fears that rapid AI advancements could disrupt revenue streams for outsourcing and software services firms.

Two key developments are likely to influence sentiment: Infosys’ upcoming investor meet centered on artificial intelligence and the ongoing Artificial Intelligence Impact Summit. Market participants are closely monitoring commentary around enterprise AI adoption, monetisation strategies, deal pipelines, and regulatory frameworks.

Analysts believe that concrete updates on how Indian IT firms plan to integrate and profit from AI-driven tools could help stabilize valuations. Conversely, vague or cautious outlooks may keep the sector under pressure.

The AI narrative has become a defining theme for global technology stocks in 2026, and Indian firms are no exception.

Global Cues Remain Muted

Asian markets were largely flat in holiday-thinned trade, offering limited direction to domestic equities. Wall Street was closed on Monday, further reducing global triggers.

Crude oil prices, however, drew attention. Brent crude futures held steady after rising 1.3% in the previous session. The uptick came ahead of scheduled talks between the United States and Iran aimed at easing geopolitical tensions.

Energy traders are watching the diplomatic developments closely, as any progress toward de-escalation could affect global oil supply dynamics and price stability. For India, a major oil importer, sustained volatility in crude prices can have implications for inflation and fiscal balances.

Foreign Investors Continue to Sell

Foreign portfolio investors (FPIs) extended their selling streak for a second straight session on Monday. They offloaded shares worth ₹9.72 billion (approximately $107 million), according to provisional data from the National Stock Exchange.

Domestic institutional investors (DIIs), however, provided support by purchasing equities worth ₹16.67 billion during the same period.

The divergence highlights a familiar pattern in recent months: foreign investors remain cautious amid global macro uncertainties, while domestic funds continue to anchor the market.

Sustained DII buying has played a crucial role in cushioning Indian equities from sharper corrections triggered by global risk aversion.

Stocks in Focus Today

Several individual stocks are likely to see action based on corporate developments:

• Cochin Shipyard has emerged as the lowest bidder (L1) for a ₹50 billion order from the Ministry of Defence to manufacture five vessels for the Indian Navy. The potential contract underscores the government’s continued emphasis on domestic defence manufacturing.

• Lupin signed a licensing and supply agreement with Spektus to commercialize its antidepressant “Deslaflex” in Canada, marking a strategic expansion in the North American pharmaceutical market.

• TVS Supply Chain Solutions entered into a collaboration with Italy-based ALA Group to explore opportunities in India’s aerospace and defence sectors.

• Embassy Developments received approval from the Real Estate Regulatory Authority (RERA) for a project in Alibaug with a gross development value of ₹4 billion.

These stock-specific triggers may generate selective momentum even if broader indices remain range-bound.

What Lies Ahead for Dalal Street?

The immediate trajectory for Indian equities appears shaped by three factors: clarity from the IT sector on AI monetisation, stability in crude oil prices, and foreign fund flows.

While earnings have delivered modest growth, valuations in certain pockets-especially technology-remain sensitive to global sentiment shifts. Any concrete roadmap from IT majors on how they plan to leverage AI could restore investor confidence.

At the same time, geopolitical developments, particularly U.S.-Iran discussions, may influence commodity markets and indirectly affect domestic equities.

For now, analysts suggest that consolidation is not necessarily a negative phase. Instead, it may offer markets time to digest earnings, recalibrate expectations, and prepare for the next structural trend.

A Market Paused, Not Retreating

Indian markets are not flashing signs of distress-but neither are they charging ahead. The current mood reflects balance: steady earnings growth, tempered global cues, and sector-specific uncertainties.

With technology stocks awaiting clarity and foreign investors cautious, domestic institutions continue to provide stability. As new information emerges from AI-focused events and global diplomacy, traders will look for cues that could define the next breakout-or breakdown.

Until then, Dalal Street seems content to move sideways, conserving energy for its next decisive move.

(With inputs from Reuters.)

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