Nifty IT dips 3%; Coforge, LTI fall up to 9%; here's what's worrying Street

Shares of IT companies were leading the list of losers on the bourses on Friday after tech-heavy Nasdaq Composite index in the US witnessed its worst single-day sell-off in 2022 overnight on Thursday.

The Nifty IT index plunged 3.2 per cent on the National Stock Exchange (NSE), and was the worst hit index amid a broad-based sell-off. Individually, all 10 index constituents were down in the dumps led by Coforge (down 9 per cent), Mindtree (5 per cent), LTI (4.8 per cent), and LTTS (4.4 per cent). Large-caps like Tech Mahindra, Wipro, Infosys, TCS, and HCl Tech declined between 1.6 per cent and 3.4 per cent. In comparison, the Nifty50 index was down 1.7 per cent at 10:40 AM.

Within the pack, shares of Wipro hit a fresh 52-week low of Rs 484 in Friday's intra-day trade, extending their fall of the past five days. The stock has dropped 7 per cent during the period after the company reported a disappointing margin for March quarter (Q4FY22). READ MORE

According to analysts, IT companies have lost their sheen after March quarter results highlighted slowdown in deal momentum, and margin pressure.

The combined market capitalisation of the big five IT companies that are part of Nifty50 index has declined nearly 10 per cent so far in April, against just 1.3 per cent decline in the benchmark during the period. 

This is the first major decline in the share prices and market capitalisation of IT firms after seven consecutive quarters of growth. The decline has been led by Infosys, Tech Mahindra, and Wipro, in that order. Infosys' market capitalisation has declined 17 per cent month-to-date from Rs 8.02 trillion to Rs 6.67 trillion on Thursday. Tech Mahindra has lost 15.3 per cent of its market cap, while Wipro is down 11.7 per cent during the period. READ MORE

According to a Business Standard report, the decline has been hassparked a decline in the IT industry's weighting in the Nifty50 to 15.65 per cent from 16.2 per cent at the end of March. This is its lowest level since the September 2020 quarter. The industry weighting had reached a record high of 18.05 per cent at the end of December 2021.