Nifty IT dives 4% amid sharp sell-off; Infosys, LTM, Coforge worst-hit

Shares of Indian information technology (IT) companies came under heavy selling pressure on Friday, pulling the Nifty IT index down over 4 per cent and making it the worst-performing sectoral index.

 

LTIMindtree was the top loser, down nearly 6 per cent, followed by Coforge, Infosys, and Mphasis, falling over 5 per cent each. The Nifty IT index slipped nearly 4 per cent to hit an intraday low of 28,978.15, down 1,146 points. In comparison, the Nifty 50 was quoting at 23,919.95 levels, down by 253.10 points or 1.05 per cent. 

 

Among index constituents, Tech Mahindra, TCS, Persistent Systems, HCL Tech, and Wipro also declined up 4 per cent each.

 

 

According to analysts, the primary concern for IT stocks is the deflationary pressure from Generative AI, which is expected to trigger a 2-3 per cent annual drop in traditional services revenue as automation reduces the manpower needed for legacy projects. Sentiment was also dampened by a weak growth outlook from Infosys and ongoing global uncertainty.

 

Sunny Agrawal, head of fundamental research at SBI Securities, said the IT sector earnings so far have been muted, often coming in either in line with or below expectations. 

 

"A major concern is the deflationary pressure from AI, which is impacting the growth prospects of major Tier 1 companies. Consequently, FY27 is shaping up to be a transition year as the industry pivots from traditional services to an integrated model powered by AI through partnerships with players like ChatGPT and Anthropic," he said.

Infosys, LTIMindtree Q4 results

According to JM Financial, Infosys reported its Q4FY26 results with both revenue and margins coming in below expectations. The brokerage noted that FY27 revenue growth guidance of 1.5-3.5 per cent Y-o-Y (including 20–25 basis points from acquisitions) was below its expectations of 2-4 per cent, although margin guidance of 20-22 per cent was in line. 

 

Analysts said the lower end of guidance reflects demand weakness, while the upper end assumes recovery, with FY27 margins also expected to be impacted by a 70 bps dilution from acquisitions. 

 

However, the brokerage continues to prefer Infosys among the top IT names given strong large deal wins, while revising EPS estimates down 1-2 per cent for FY27–28E.

 

LTIMindtree, a major IT services company, also announced its quarterly results on Thursday, April 23. While the stock is down over 5 per cent intraday, analysts at Antique Stock Broking said the company reported a decent Q4 performance, with revenue growing 1.2 per cent Q-o-Q in constant currency terms, marginally below expectations. The brokerage noted that the top US BFSI client was the key drag, leading to a mid-single-digit decline in revenues from the top five clients.

 

However, the management remains confident of sustaining FY26 growth momentum into FY27, supported by a strong exit rate, robust deal pipeline, and continued traction in large deals. While the company has not provided explicit numerical guidance, it reiterated its ambition to deliver industry-leading growth.

 

According to the brokerage, at the vertical level, the outlook remains mixed but is improving. Margins are expected to improve gradually in FY27, supported by structural cost optimisation, AI-led productivity gains, and operational efficiency initiatives under the “New Horizons” framework.

IT sector outlook

G Chokkalingam, founder and head of research at Equinomics Research, said the medium-to-long-term outlook for the IT sector remains bleak, and the wealth creation story appears to be over. 

 

"Even before the threat of AI, dollar revenue growth was modest at 2-4 per cent, and that is now expected to slow further to 0-2 per cent or even slip into negative territory. However, in the short term, we could see a tactical upside of 10-15 per cent. This is because many of these stocks have already been significantly 'punished' in terms of valuation, providing a more appealing entry point.

 

According to Chokkalingam, the integration of AI into operations, the depreciation of the rupee, and the restoration of buyback facilities in the budget provide some near-term support. While these factors may trigger a relief rally, the sector’s long-term wealth creation prospects look weak from here.

 

Agrawal believes that while the total contract value remains healthy, the primary hurdle will be the successful execution of these new models and the ability to maintain margins. If these companies can navigate this transition effectively, we may see a more robust recovery by FY28.  ==================  (Disclaimer: Views and outlook shared belong to the brokerage/analysts and are not endorsed by Business Standard. Readers' discretion is advised.)