IT companies' slice of Nifty 50 pie shrinks sharply to 17-year low

Sector's weighting in index has slipped to 10.2% from peak of 17.7%

India’s top information technology (IT) services exporters, such as Tata Consultancy Services (TCS), Infosys, Wipro, and HCLTech, continue to lose ground on the bourses, even as the bulls return to the Street.

 

The Nifty IT index has fallen 9.5 per cent so far in April, compared to a 1.4 per cent gain in the broader Nifty 50 during the same period. On Thursday, Nifty IT edged up just 0.23 per cent, trailing the 1.8 per cent rise in the benchmark index.

 

As a result, the IT sector’s weighting in the Nifty 50 has slipped sharply. It now stands at 10.2 per cent — its lowest in 17 years — and only marginally above the record low of 9.7 per cent in March 2008, a few months before the Global Financial Crisis (GFC) breakout. This marks a 42 per cent decline from the sector’s 15-year high weighting of 17.7 per cent at the end of March 2022.

 

With its recent slide, the Nifty IT is close to giving up all the relative gains it made over the Nifty 50 during the Covid-19 pandemic and even across the 21 years since 2004.

 

The five IT services companies in the Nifty 50 had a combined market capitalisation (mcap) of ₹25.5 trillion on Thursday, compared to the ₹189.4 trillion total for all Nifty 50 constituents. 

 

The IT sector’s recent underperformance and its shrinking share in the index mirror its struggles during the lead-up to the 2008 GFC. 

 

Historically, the sector’s average weighting in the Nifty 50 has been around 13.8 per cent since 2001.

 

This is also the worst start to a year for IT stocks in over two decades. The Nifty IT index has dropped 23 per cent since the beginning of 2025, marking its worst year-to-date performance since the index’s inception in March 2004. The previous low was in 2022, when the index declined 18.3 per cent in the first four months of the year.

 

At its current pace, the IT index is on track to lag the benchmark for a fourth straight calendar year — one of its longest and steepest periods of underperformance.

 

Analysts link the sharp selloff in IT stocks to disappointing 2024-24 (FY25) fourth quarter (Q4) results and a weak earnings outlook for 2025-26 (FY26).

 

“Earlier, IT companies were growing revenues at 2-4 per cent annually in US dollar terms. Now, revenues are expected to stagnate or even contract in FY26. Investors’ concerns about the sector’s inability to deliver earnings growth were reinforced when both TCS and Infosys reported year-on-year declines in earnings for Q4FY25 and near-flat revenue growth,” says Chokkalingam G, founder and head of research at Equinomics Research.

 

The industry’s growth prospects have also been clouded by Donald Trump’s tariff threats and their likely adverse impact on the US economy, the IT sector’s biggest market.

 

“IT sector fortunes are highly linked to the US macro environment, and that’s rarely been so indeterminate as now. We recommended stocks with higher US exposure in our ‘Outlook for 2025 and Beyond’. However, just three months later, the US outlook is the most uncertain," write analysts at HSBC Global Research in their Q4FY25 earnings preview for Indian IT services.