Nifty IT index tumbles into bear market; Rs 8.4 lakh crore wiped out in 6 months

The Nifty IT index has officially entered bear market territory, plunging over 21 per cent from its peak. A fresh 3 per cent drop in the latest trading session has deepened the losses, erasing a staggering Rs 8.4 lakh crore in market capitalization. Almost all major IT firms have suffered significant declines, with nine out of ten constituents slipping over 20 per cent. The only exception is Wipro, which, despite a 17 per cent fall, is still in the correction phase rather than the bear market zone.

Top IT firms face steep declines

The downturn has severely impacted India's biggest technology firms, wiping out billions in market value. Tata Consultancy Services (TCS), the largest IT firm, has suffered the most, with its market capitalization shrinking by a massive Rs 3.8 lakh crore. Infosys, another key player, has witnessed an erosion of Rs 1.7 lakh crore in its market value.

LTIMindtree, which has taken the worst hit among IT stocks, has plunged 34 per cent, underscoring investor concerns over future growth prospects. Coforge and L&T Technology Services (LTTS) have also faced significant sell-offs, losing Rs 16,000 crore and Rs 15,000 crore, respectively.

Why is Nifty IT struggling?

The decline in IT stocks is largely driven by global macroeconomic uncertainties and deteriorating investor confidence. Several factors have contributed to this downturn, including:

• Global slowdown: Major markets like the US and Europe, which account for a large share of Indian IT revenue, are experiencing sluggish growth. As a result, IT spending has slowed down, directly impacting the earnings outlook for Indian tech firms.

• Tariff concerns: The uncertainty surrounding US trade policies has dampened business confidence. With Indian IT firms heavily reliant on exports, any changes in trade regulations could further affect revenue streams.

• Weak guidance: Recent earnings reports from major IT firms have painted a cautious picture, with slower deal wins and subdued revenue projections weighing on market sentiment.

Can the IT sector recover?

Despite the ongoing downturn, the Indian IT sector remains crucial to the country’s economy, generating billions in revenue and creating employment opportunities. However, near-term challenges persist, and a recovery will depend on multiple factors:

• Earnings reports: Upcoming quarterly results will be closely watched to assess the actual financial impact of the market correction. If revenue and profit margins remain under pressure, IT stocks could see further downside.

• Global economic policies: Any monetary easing or interest rate cuts by major economies could help improve market conditions.

• Tech adoption trends: Despite current headwinds, the demand for AI, cloud computing, and cybersecurity solutions remains strong. Increased investments in these areas could help IT firms bounce back in the long run.

For now, investors remain cautious as the IT sector navigates through an uncertain global landscape.