The Nifty IT index gained nearly 3 percent on Friday, snapping its two-session decline as investors responded positively to Tata Consultancy Services' June quarter earnings and management commentary pointing to a gradual recovery in client demand from the second quarter.

Tata Consultancy Services shares rose more than 4 percent after the company reported a 4.61 percent year-on-year increase in net profit for the June quarter. The company also indicated that demand, which had been temporarily affected by geopolitical developments in West Asia, is expected to improve in the ongoing quarter. The results marked the beginning of the first-quarter earnings season for India's IT services sector, which has been facing pressure from slower technology spending by global clients and concerns over the long-term impact of artificial intelligence on traditional software services.

The positive earnings announcement supported the broader IT sector, with all constituents of the Nifty IT index trading higher during the session. Oracle Financial Services Software emerged among the top gainers, while Persistent Systems and Mphasis also posted strong gains. Other major IT companies, including Infosys, LTIMindtree, Tech Mahindra, Wipro, and HCL Technologies, also advanced.

Despite the strong rally, market experts believe the sector's broader technical outlook remains cautious. According to analysts, the Nifty IT index continues to trade below its key weekly moving averages, indicating that the primary trend remains under pressure.

Technical indicators suggest that momentum has improved from earlier levels, with the index moving from the Lagging quadrant to the Improving quadrant on the Relative Rotation Graph. However, analysts noted that relative strength is still lacking, indicating that sustained outperformance has not yet been established. In addition, the MACD indicator remains below both the zero line and the signal line, reflecting the absence of a strong bullish trend.

Analysts identified the 26,100-26,200 range as an important long-term support zone, noting that the index had witnessed multiple rebounds from this level between 2022 and 2023. While intermittent pullbacks and short-covering rallies remain possible, they believe a meaningful trend reversal would require the index to decisively reclaim the 29,000-29,100 resistance zone.

Another technical analyst observed that IT stocks have entered an oversold territory following the recent correction, making a near-term recovery possible. However, confirmation of a durable bottom will depend on the market's follow-through after the ongoing earnings season, suggesting that investors should continue to monitor quarterly results and management commentary from major IT companies.