The IT sector has reported robust earnings for the September quarter. In a review report, Motilal Oswal mentioned that the Q2 results have reinforced its 'overweight' stance on the sector.

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"Q2FY21 has seen sustained earnings momentum in IT, resulting in a healthy earnings upgrade for the second consecutive quarter. Management commentaries remained upbeat across the board. Lastly, a fresh round of dividends and buybacks provides a strong cushion for sustained re-rating, in our view," the brokerage stated in its report.

The Nifty IT has outperformed benchmarks in 2020 to date. The Nifty IT index has rallied over 35 percent in this period as compared to a 2 percent fall in Nifty.

All constituents in the Nifty IT index have also given positive returns this year with Mindtree leading the pack, up 67 percent. L&T Infotech was a close second, up 66 percent in 2020. Meanwhile, Infosys jumped 44 percent, HCL Tech added 44 percent, Wipro rose 36 percent and TCS advanced 20 percent on a YTD basis.

The brokerage continues to maintain an 'overweight' stance on the model portfolio, and after the sharp run-up, has now replaced Wipro with HCL Tech.

HCL Tech has a better organic growth outlook over FY21–22 and trades at a 40 percent discount to TCS, offering a decent margin for safety, MOSL added.

However, it had recently downgraded Mindtree post its stellar outperformance in 2020 YTD.

Going ahead, the brokerage expects the relative earnings outperformance of the IT sector to sustain for the remainder of FY21. Despite the recent run-up, it believes the IT sector still trades at reasonable valuations.

MOSL believes that strong relative earnings performance, coupled with resilient sector fundamentals, supports its continued positive stance on the sector.

COVID-19 has served as a tailwind for the Indian IT sector, with enterprises accelerating investments in digital transformation to stay resilient in a disruptive business backdrop, it added.

Further, commentaries from IT companies also suggest robust deal momentum and strong cost control, with several companies upping their guidance, which stands out against the otherwise tepid earnings growth seen in broader markets.