Why Nifty IT index fell 2% after two straight sessions of lifetime highs?

The Nifty IT index saw a sharp decline on Thursday, following overall a weakness in the market. The index slipped 2.11 per cent hitting an intraday low at 43,087.25 points.   In the last 30 days the index has moved up by 3 per cent, in comparison to NSE’s Nifty50’s drop of 1.16 per cent. At 11:34 AM; the Nifty IT index was down 2 per cent, compared to Nifty50’s fall of 0.78 per cent.

 

Individually, shares of Infosys fell the most in intraday deals, dropping 3.06 per cent at Rs 1,865.75 per share intraday, followed by L&T Technology Services also dropping 3 per cent at Rs 5,268 per share. Tech Mahindra shares also fell 2.84 per cent at Rs 1,706.80 a piece, while HCL Tech slipped to day’s low of Rs 1,849, down 2.2 per cent in intraday trade. 

 

Other IT stocks such as LTIMindtree, Mphasis, Wipro, Persistent Systems, TCS and Coforge also fell in the range of 1-2 per cent each.   Stock to Watch

 

The weakness and profit booking in the IT stocks came after two consecutive days of the Nifty IT index hitting lifetime highs and making a new summit at 44,330.60 level on Wednesday.

 

Technical experts suggest that the Nifty IT index has displayed a bearish candlestick pattern, resembling a shooting star, followed by a long red candle. This combination typically signals the potential formation of a temporary top in the market, indicating that upward momentum might be losing strength. 

 

“Key heavyweights in the index, such as TCS, Infosys (INFY), and HCL Technologies (HCLTECH), appear to be showing signs of exhaustion at higher levels. This lack of bullish strength in these prominent stocks could trigger a broader pullback in the IT sector,” said Jigar S Patel, senior manager - technical research, Anand Rathi Shares and Stock Brokers. 

 

According to Patel, the next significant support for Nifty IT lies near the 42,600 level, as indicated by a trendline on the chart. To mitigate potential losses and capitalize on existing gains, Patel advised investors to book profits on any upward bounce in the IT sector and refrain from initiating fresh long positions until the technical outlook improves.   Stock Market on 28 nov 2024

 

That said, overnight in the US, a pullback in major technology stocks led to a lower close for the US markets in a thin trading session.

 

Nvidia, a leading chipmaker, dropped over 1 per cent, while Meta Platforms fell by 0.8 per cent. Shares of Dell and HP saw significant declines, with Dell down more than 12 per cent and HP falling over 11 per cent after both companies issued disappointing earnings forecasts. 

 

Meanwhile the tech heavy Nasdaq Composite lost 0.6 per cent to end at 19,060.48.