The NIFTY IT (NIFTYIT) is an equity index designed to track the performance of IT companies in India. Software consulting and computers comprise 97.97% of the ETF. 

Here, the new trade tariffs implemented by the Trump Administration and increased to 50% has had an impact causing the ETF to fall by 1.48% following the announcement this week. More significantly, NIFTYIT has fallen by 20.67% since January 1 of 2025. 

While it’s important to take note of external headwinds, there is still good reason to remain bullish on the India ETF thanks to the country’s IT service sector. It pays to be optimistic here thanks to India’s dominant role as a global partner for IT and digital transformation projects. The high demand for tech solutions means that we can expect the IT service sector to offer stable growth and investment opportunities. 

For example, the outsourced IT services market stands at $573 billion globally and, with an 8% annual growth rate, is on track to nearly double by 2031, according to analysis from Baird Capital. 

The sector in India also boasts a competitive advantage due to its value model built on scale and technical expertise that few other markets can replicate. Meanwhile the rise of Agentic AI is opening up new service opportunities that the Indian IT service sector is well positioned to deliver on. 

While foreign direct investment (FDI) into India has fallen this year, the trends below indicate that there is still plenty of room to be bullish on India's IT sector, which is why we have a Buy on the ETF NIFTYIT. 

AI’s impact on India’s 5.8 million person IT sector 

Although AI is an important growth lever for the IT sector, its impact on the labor market has been a keen source of concern. With an increasing number of coding and development tasks being outsourced to AI tools, this undermines the need for many existing job roles, undercutting demand. For instance, according to a report by McKinsey, by 2030 up to 60% of jobs could be significantly altered by AI tools.

Given that the IT sector is one of the biggest employers in India, responsible for 7.5% of the country’s GDP, widespread unemployment and millions of newly obsolete technical workers could have a very disruptive effect on the country’s economy. 

However, the rise of AI is shaping the IT labor market in ways that are contrary to what many doomsayers have expected. 

In fact, recent data shows that the rise of GenAI has had a limited impact on the job market, according to economists Anders Humlum and Emilie Vestergaard. "AI chatbots have had no significant impact on earnings or recorded hours in any occupation," the authors stated in their paper.

The IT sector will remain a pillar in India’s economy, it having generated $280 billion in revenue, and we can expect even more investments to flow into this. In order to protect future revenue and the stability of IT service companies, decision makers will need to double down on investments in people and talent with high levels of technical competency in software engineering and data science, benefiting the ETF NIFTYIT. (NFTY), which refers to a family of Indian benchmark stock market indices, is related to NIFTYIT with both being managed by the NSE.

We can also expect to see a spike in demand for security specialists due to the explosive rise in cyberattacks worldwide. In Q1 of 2025, the average weekly cyberattacks per organization rose by 47% compared to the same period in 2024. “Unfortunately, your current team may or may not be equipped to handle the problem on their own. Whether it's an issue of expertise, time constraints, or both, institutions of all types and sizes should have a service provider they can call to help with containment and recovery as part of their incident response plan,” according to Charlie Sander of ManagedMethods. 

Global Capability Centers are taking a front-row seat in corporate strategy 

The IT Service sector also promises to underpin the stability of the India ETF thanks to the evolving role of Global Capability Centers (GCCs) - offshore or nearshore entities established by multinational corporations to centralize and manage business functions. 

According to McKinsey, GCCs are moving from being execution centers to becoming transformation catalysts. The tech-dominated environments of today means IT service delivery is increasingly being relied upon. This goes far beyond a need for a well-organized computing infrastructure to a service function that’s core to corporate growth. 

As a result, the role of GCCs has undergone a seismic shift, and this is set to have a material impact on India's IT sector. Rajeev Ranjan, COO at Ness Digital Engineering, explained that: “For years, the narrative around GCCs in India was anchored in one word: cost. They were the operational backroom, essential, efficient, and far from the strategic spotlight. Not anymore.” 

Today, corporations look to India as the place to build new products and meet core strategic targets. As one example, the Microsoft India Development Center has grown into one of Microsoft’s largest R&D hubs outside of the U.S.

India also has a service supply chain infrastructure that is well positioned here. According to Ranjan, “India now hosts nearly half of the world’s GCCs, firmly securing its place as the global epicenter of enterprise capability. With more than 1,900 centers employing over 2.1 million professionals, the market has swelled from $40.4 billion in FY19 to $72 billion in 2025 and is on track to touch $110 billion by 2030. This is not growth by inertia; it’s the result of a deliberate shift in purpose, capability, and ambition.”

The  growth of this industry leads us to be bullish on the sector. With the rise of AI in 2025, the race is on by multinationals to gain a competitive advantage via data products and business acceleration. GCCs in India are an effective launchpad thanks to proprietary AI models, industry-specific data platforms, and decision intelligence systems. 
 

In summary, GCCs are expected to act as a major boost for India’s economy in the near future, providing a further benefit to the country's IT sector and NIFTYIT ETF. 

Investments and businesses continue to flow into India 

India’s IT service sector will also be bolstered by a steady stream of investments from multinationals. Ciklum, a UK-based company, recently announced plans to expand its operations in India by opening two new engineering hubs in Chennai and Pune. 

Bengaluru, also known as the Silicon Valley of India, helps to draw business investment to the country. Rajat Mishra, founder of AI presentation enterprise Prezent, hails from one of India’s top tech schools. Although his company is headquartered in Los Altos, many of his the remote first team are based in a Bengaluru subsidiary. 

Indian founders such as Mishra, who launch ventures abroad, also help to boost the reputation of India’s IT sector internationally. Another example can be found with Shagun Malhotra, founder of SkyStem and creator of the company's flagship accounting solution, ART. Riaz Syed of Infinant, Imtiaz Mohammady of Nisum and Jitesh Shetty of Credibl ESG are three other cases in point of entrepreneurs building enterprises in the U.S. and re-investing back into India.

The strength of India’s tech sector has also piqued the interest of venture capital funds. Investment activity in Silicon Valley has been cooling off, and many increasingly see India as the future. According to the founders of India-based hedge fund Panvira, “the investment opportunity in India’s technology sector is akin to Silicon Valley in the 1990s or China in the 2000s.” 

Panvira aims to raise $200mn in foreign capital to invest from January 2026, while Carson Block’s hedge fund, Muddy Waters, is also looking to set up an investment vehicle in India.

With the potential of a boom market on the horizon, the local tech sector could see sky-high valuations that drive India’s economy and IT sector to new heights. 

Expect India’s IT sector to go from strength to strength 

The future looks bright for India’s tech sector thanks to multiple strategic advantages. We expect India’s IT sector is able to rise as expected. This, combined with the ETF's 20.67% decrease since January of 2025, leaves us to have a Buy on the ETF NIFTYIT.