IT rout deepens: Nifty IT falls 3%, down 9% in 6 days on risk-off sentiment

Analysts attributed the sustained weakness in the Nifty IT index to broad-based pressure in global technology stocks, cautious sentiment over slower US tech spending, and rising geopolitical tensions

Shares of information technology (IT) companies extended losses for the sixth straight session, with the Nifty IT index falling another 2.69 per cent on the National Stock Exchange (NSE) during Thursday’s intraday trade, amid rising geopolitical volatility in West Asia and continued selling pressure in IT sector. 

The index has been on a sustained downward trajectory since June 3, and is down about 9 per cent over this period. On a year-to-date basis, the Nifty IT index has fallen nearly 27 per cent, while over the past one year it has declined by 28.24 per cent, showed the NSE data. 

 

Although the index trimmed part of its losses, it continued to trade under selling pressure through the session. At 11:11 AM on Thursday, the Nifty IT index was down 1.36 per cent at 27,896 levels.  Among individual stocks, Infosys, HCL Technologies, and LTM were trading lower by over 2 per cent each. Tata Consultancy Services, Coforge, Wipro, Oracle Financial Services Software, Mphasis, Persistent Systems and Tech Mahindra also traded in the red, with losses extending up to 1.3 per cent.  CATCH STOCK MARKET UPDATES LIVE

Macro, geopolitical factors weigh on sentiment

Analysts attributed the sustained weakness in the Nifty IT index to broad-based pressure in global technology stocks, cautious sentiment over slower US tech spending, rising geopolitical tensions, and continued foreign investor selling. They also cited concerns over the impact of artificial intelligence on traditional IT services, along with reduced expectations of aggressive interest rate cuts by the US Federal Reserve following stronger inflation data, as additional factors weighing on sentiment. 

“Sentiment remained cautious due to concerns around slower tech spending in the US, rising geopolitical tensions and continued selling by foreign investors. Investors are also becoming slightly cautious about the impact of AI on traditional IT services, especially as companies globally are reassessing budgets and delaying decision-making on new projects. Adding to the pressure, stronger US inflation data has reduced expectations of aggressive rate cuts by the US Federal Reserve, which has further impacted global risk sentiment,” said Ravi Singh, chief research officer at Master Capital Services. 

Echoing similar views, Amit Gupta, senior research analyst – commodities, equities & currencies at Kedia Advisory, said, “The primary driver for the current market weakness—including the IT sector—is the heightening of tensions between the US and Iran. This has fuelled risk aversion among investors, leading to a broad-based decline across major indices. The sector is under intense selling pressure, with top constituents like HCL Technologies, Infosys, and Tech Mahindra among the leading losers. The index is struggling to maintain its technical footing after a recent correction.”

Technical view

From a technical perspective, Gupta said momentum indicators, including the RSI, have weakened, slipping below the 40 mark, while the index continues to trade below key moving averages — the 50-DMA (29,580) and 200-DMA (33,996).  READ | Sugar stocks gain up to 5% on E22-E30 petrol duty waiver; check top picks 

He added that the near-term bias remains sideways to bearish, with immediate support around the 26,800 level being tested as the index attempts to consolidate after its recent sharp decline from June highs.

Near-term outlook remains cautious

Analysts, however, remain divided on the sector outlook, though they broadly agree that near-term volatility is likely to persist. “Even after the recent correction, the long-term outlook for fundamentally strong IT companies remains positive because demand for digital transformation and AI-related services is still growing globally. However, near-term volatility in the sector is likely to remain elevated,” said Singh. 

Gupta, on the other hand, believes that until there is greater clarity on the trajectory of global inflation, Fed policy, and the containment of geopolitical risks, market participation in the IT sector is likely to remain cautious and defensive.