Nifty IT index slips nearly 2% for second straight day; here's why

In the past one week, Nifty IT index has corrected 4.8 per cent, compared to 1.2 per cent decline in the Nifty 50.

Information technology (IT) companies share price movement

 

Information technology (IT) stocks were weak, with the Nifty IT index down nearly 2 per cent on the National Stock Exchange (NSE) due to profit booking.

 

The Nifty IT index declined 1.7 per cent in intra-day deals, after falling 1.75 per cent on Monday. The index quoted lower for the third straight trading day. In the past week, Nifty IT index has corrected 4.8 per cent, compared to 1.2 per cent decline in the Nifty 50.

 

Prior to that, the Nifty IT index rallied 24 per cent to 31,823.15 on August 11, 2026, from its 52-week low of 25,699.1 touched on July 1, 2026. During the same period, Nifty 50 was up 2.4 per cent.

 

Tata Consultancy Services (TCS), Infosys, HCL Technologies, Coforge, Tech Mahindra, LTM and Wipro were down in the range of 1 per cent to 2 per cent on the NSE in intra-day deals.  Check - TOP GAINERS NSE | TOP LOSERS NSE

Brokerages view on IT sector

 

The April to June 2026 quarter (Q1FY27) was broadly balanced, with improving demand indicators offset by muted revenue growth and near-term margin pressures. Deal momentum remained healthy across the sector, led by large transformation, vendor consolidation and AI-led programmes.

 

Indian IT valuations have rebounded post Q1FY27, with the Nifty IT Index up 20 per cent from its July 2026 lows, although still negative on a year-to-date (YTD) basis. The recovery reflects improving sentiment, healthy deal pipelines and better H2FY27 demand commentary; however, risk-reward has now moved to a more balanced zone, making further upside momentum increasingly dependent on execution and earnings delivery, according to analysts at Choice Institutional Equities.

 

AI monetisation remains the key structural debate, with early adoption creating near-term deflationary pressure on effort-based revenue before meaningful AI-led scale-up. Within Tier I, the brokerage firm said it favours TCS and Tech Mahindra for stronger margin resilience and deal conversion, while Coforge and Persistent Systems remain their preferred companies in the mid-cap, given superior growth visibility, sustained deal momentum and consistent execution. The brokerage firm expects the sector’s re-rating to become increasingly stock-specific and execution-led, rather than broad-based.

 

Meanwhile, the recent 3–20 per cent rally in IT-services stocks reflects valuation support and attractive yields, but broad-based multiple expansion may remain limited amid high Fed rates, elevated capex, debt build-ups and competition, analysts at Systematix Institutional Equities said in the IT sector report.

 

The shift towards AI-enabled delivery and rising debt also raises the bar for returns. Under a low-probability scenario of negative sentiment towards AI infrastructure stocks, IT services could benefit. “Among select IT firms demonstrating strong capability development, share gains and new wins, we prefer Tech Mahindra and HCL Tech among large caps, and Persistent Systems (NOT RATED) and Coforge (NOT RATED) among mid-caps, given their strengths in sovereign and vertical AI, data engineering and AI-led application development,” the brokerage firms said.  Disclaimer: Views and outlook shared on the stock belong to the respective brokerages and are not endorsed by Business Standard. Readers' discretion is advised.