The IT index decline gathered pace after it broke down from a Head and Shoulders pattern on the weekly chart - a classic signal of a structural trend reversal, explains Sachin Gupta of Choice Broking.
The global research and broking house has cut their earnings estimates by 1-4 per cent across IT firms and expects 6 per cent earnings CAGR over FY26-28.
The Nasdaq IT services basket has corrected meaningfully, dragging Indian IT ADRs lower and triggering a risk-off sentiment that has spilled into domestic markets, said ICICI Securities.
TCS, Wipro, Infosys, Coforge, Tech Mahindra, Persistent Systems, HCL Technologies, LTIMindtree and Mphasis were down in the range of 4 per cent to 5 per cent in intra-day trade on Thursday.
Cyient, Birlasoft, Cigniti Technologies, eClerx Services and Tata Technologies were down between 4 per cent and 6 per cent in Friday's intra-day trade.
Improved policy optics could encourage US enterprises to advance discretionary tech spending and GCC expansion, even though immediate revenue or margin acceleration for IT firms is unlikely.
Analysts anticipate a stronger growth recovery for IT sector in FY27 compared to FY26, driven by an improvement in demand, more stable macro conditions, increased budgetary spending and deal ramp-ups.
The Nifty IT index needs to breakout above 38,500 resistance, for a likely 13 per cent rally, says Kunal Shah, Senior Technical Analyst at Mirae Asset ShareKhan.
In the past one month, TCS, Infosys, Tech Mahindra, HCL Technologies, LTIMindtree, Persistent Systems and L&T Technology Services have rallied between 9 per cent and 15 per cent.
Analysts attributed the up move to a pullback rally after sharp declines in past sessions. The index is currently 22.72% below its 52-week high of 46,088.90 and is down about 14.8% so far this year.
Technical charts suggest that the IT index may gain another 5%, with heavyweights Infosys, TCS and HCL Technologies possibly rallying up to 17%. Wipro and Tech Mahindra, however, may see tepid trends.
