Business

Decade-High Dividend Yields in Indian IT Stocks: A Golden Opportunity or a Trap? Experts Weigh In

Indian IT Sector at a Crossroads

India’s IT sector is entering the Q1 earnings season with investor interest at a low ebb and valuations at their most attractive levels in years. The Nifty IT index has plunged over 10% so far in 2025, dragging down marquee names like TCS, Infosys, Wipro, and HCL Tech.

Indian IT stocks hit decade-high dividend yields. Is it the right time to buy? - Here’s what experts say

Dividend Yields Reach Decade-Highs

Yet, dividend yields across top IT firms have now reached decade-highs, setting up a potential contrarian play for investors. TCS, which will kick off the earnings season on July 10, has seen its stock fall 17% in 2025. But it now offers a 3.7% dividend yield, surpassing its five-year peak of 3.6%.

Expert Opinions and Market Sentiments

BNP Paribas analyst Kumar Rakesh suggests that current levels indicate "excessively bearish sentiment," while HSBC expects modest sequential growth of 0–1% in constant currency terms, which could signal a bottoming out of the earnings cycle.

Structural Shifts and Future Outlook

Despite challenges like US tariff risks and sluggish discretionary spending, analysts are seeing early signs of stabilisation. The anticipated US Fed rate cuts, coupled with a seasonally strong first half of FY26 and improving deal win rates, could support a turnaround.