MUMBAI, Aug. 27 -- The number that moved India's technology investors on August 7 was not a quarterly revenue figure. It was 31,799 - the intraday high the Nifty IT index touched before settling 2 percent higher on the day, nine percent above the trough it had reached in late July.

That trough represented a 29 percent decline from the index's January peak, one of the steepest drawdowns the sector has sustained in recent years. At the low, more than Rs 4 trillion in combined market capitalisation had been erased from India's largest technology companies. The August rebound has not restored that loss. What it has done is force investors to choose between two narratives that the first-quarter earnings season produced in unusual parity.

The...