Investors lose Rs 77,000 crore as Nifty IT hits 6-month low; this is the trigger

The Nifty IT index extended its losing streak on Monday, slipping over 2 per cent as weak economic data from the US rattled investor sentiment. At 10:00 AM, the index was trading at 39,612, after hitting an intra-day low of 39,465.75.

With all ten constituents in the red, the sector emerged as the biggest drag on the NSE. The IT slump follows a 2.20 per cent decline in the Nasdaq on Friday, signalling global concerns over slowing US business activity and inflation fears.

Top losers in Nifty IT

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Leading the fall, L&T Technology Services plunged 5.55 per cent, followed by Persistent Systems (-4.11 per cent), Mphasis (-3.79 per cent), LTIMindtree (-3.07 per cent), and HCLTech (-2.74 per cent). The sector has now slipped more than 14 per cent from its 52-week high of 46,088.90, recorded on August 13, 2024.

Why are IT stocks falling?

The latest US economic data has heightened fears of a slowdown, impacting IT stocks that rely heavily on American clients.

• US business activity slowdown: The S&P Global Flash US Composite PMI Output Index fell to 50.4 in February from 52.7 in January, its lowest level in 17 months.

• Weak consumer sentiment: The US consumer sentiment index dropped to a 15-month low, reflecting growing concerns over inflation and potential economic stagnation.

• Trade war worries: President Donald Trump’s proposed tariffs on multiple sectors have added to uncertainty, impacting business confidence.

"There is a relation. IT depends a lot on US order flows. These weak macroeconomic indicators suggest there could be a slowdown," said independent market analyst Ambareesh Baliga.

Is there hope for IT stocks?

Despite the prevailing weakness, CLSA sees some positives for Indian IT firms heading into FY26. The brokerage expects cost optimization efforts to support margins and believes the US BFSI sector will maintain growth.

• Outperform ratings: CLSA assigned ‘Outperform’ ratings to Persistent Systems, Tech Mahindra, and Wipro.

• Hold ratings: HCLTech and Infosys received ‘Hold’ ratings.

• Underperform rating: LTIMindtree was assigned an ‘Underperform’ rating.

While short-term headwinds persist, long-term investors may find selective opportunities as valuations correct. Experts advise caution but suggest tracking US economic indicators closely for future market direction.