Nifty IT worst performer so far in 2025, drops 10%; time to bottom fish?

IT stocks in focus: Indian IT stocks have been caught in a storm this year, underperforming the broader market by a wide margin as global and domestic headwinds continue to pile up. 

 

Once a darling of investors, the sector has struggled to find its footing in the first half of calendar year 2025, weighed down by persistent FII outflows, geopolitical uncertainty, a sluggish deal pipeline, and global macro risks, analysts said.

 

Between December 31, 2024 and June 25, 2025 the Nifty IT index has slumped 9.90 per cent, in stark contrast to the Nifty 50, which is up 6.76 per cent during the same period, NSE data showed.  Individually, Infosys has plunged 14.1 per cent this year-to-date (Y-T-D), Tech Mahindra remained flat with a negative bias, Wipro slipped 10.8 per cent, HCLTech dropped 10.5 per cent, and LTIMindtree fell 2.6 per cent.

 

 

The divergence is striking even when compared to other sectors. Nifty Auto has gained 4.3 per cent, Nifty Bank has surged 10 per cent, and Nifty Metal is up 8 per cent. Other indices including Nifty FMCG (down 3.5 per cent), Pharma (down 7 per cent), and Realty (down 2 per cent), too, have managed to outperform IT.

 

One of the biggest drags has been sustained selling by foreign institutional investors. FIIs have pulled out a net ₹1.35 trillion from Indian equities in the first six months of 2025, led by heavy outflows in January (₹87,374.66 crore) and February (₹58,988.08 crore). Although March to May saw marginal inflows, selling resumed in June, reflecting growing global caution.

  Track Stock Market LIVE Updates

 

Moreover, the US-China trade conflict has only made things worse. Rising tariffs and protectionist rhetoric have cast a long shadow on global tech spending. 

 

Indian IT firms, which earn the lion’s share of their revenues from the US, are particularly vulnerable to cutbacks in discretionary spending and delays in outsourcing decisions. Trade tensions have also disrupted supply chains and led to postponement of digital transformation deals.

 

Market veteran Deepak Jasani noted that IT companies are currently struggling with revenue visibility due to the absence of large deal wins. While smaller deals are still taking place, they haven’t provided much reassurance to the sector. 

 

“The disruptions driven by artificial intelligence (AI) have created uncertainty among IT spenders and investors regarding where—and whether—to spend or invest in the IT space.” 

 

Additionally, ongoing tariff wars, Jasani said, pose a broader risk to global economic growth, which, if it slows, could further pressure IT companies by reducing deal flow.

 

Contrasting this, Kotak Institutional Equities noted that AI adoption is progressing, moving from proof-of-concept (POC) to production in areas like software development, content creation, and BPO services. Tools like GitHub Copilot and Claude are gaining traction, and clients are encouraging vendors to integrate generative AI for efficiency gains. While these efficiencies can be meaningful, they currently fall short of the lofty claims made by hyperscalers.

 

Opinions remain split on AI’s deflationary impact. While IT firms expect savings to be reinvested into new initiatives, potentially boosting demand, others in the industry worry that GenAI may ultimately prove a net negative for services revenue.

 

A mixed set of Q4FY25 results from major IT players further weighed on sector sentiment. Infosys, HCLTech, and Wipro all posted subdued performances, citing weak demand and delayed deal ramp-ups.

 

Infosys reported a sequential revenue decline in constant currency and cut its FY26 growth guidance to 0–3 per cent. HCLTech’s results were in line, but soft project execution led it to trim FY26 guidance to 2–5 per cent. Wipro posted just 0.8 per cent CC revenue growth and forecast a Q1FY26 decline of 1.5–3.5 per cent, reflecting weak discretionary spending and cautious client sentiment.

 

On the investment front, Jasani suggested focusing on select mid-cap IT stocks, while exercising caution with large-cap names, which appear overowned at current levels.