Why are IT stocks falling today? TCS, Infosys, Tech Mahindra lead Nifty IT's worst decline since February

Why IT Stocks are Falling Today: Information technology stocks saw steep sellingon Wednesday, with the Nifty IT index recording its steepest single-day decline since February 4, as investors booked profits following a strong rally and weak global cues weighed on sentiment.

The sell-off came after a sharp run-up in technology shares over the last few sessions, driven largely by optimism surrounding artificial intelligence (AI)-led demand and improving growth prospects for the sector.

Profit booking after a strong rally

Market participants attributed the decline primarily to profit booking after the recent surge in IT stocks.

The Nifty IT index had climbed to a one-month high and had gained nearly 15 per cent from its May lows. The index had also rallied around 7 per cent in just two trading sessions before Tuesday's correction.

With valuations rising sharply over a short period, investors chose to lock in gains, leading to broad-based selling across the sector.

Weak US software stocks add pressure

Sentiment was further dented by overnight weakness in US-listed technology and software companies.

After witnessing strong buying on the AI theme in recent weeks, several global technology stocks saw a cooling-off phase.

Shares of Cognizant, Accenture and Globant declined around 5 per cent in US trading, triggering concerns about near-term valuations in the technology sector.

The weakness in US software stocks spilled over into Indian markets, given the sector's significant dependence on overseas demand, particularly from North America.

Indian IT ADRs signal caution

Investor sentiment was also impacted by sharp declines in American Depository Receipts (ADRs) of Indian IT companies.

Wipro's ADR plunged nearly 8 per cent, marking its biggest single-day decline this year, while Infosys ADR fell around 2.5 per cent.

The sharp correction in ADRs pointed to cautious sentiment among overseas investors and set the tone for domestic trading.

Heavyweights drag Nifty lower

IT stocks emerged as the worst-performing sector, with every constituent of the Nifty IT index ending in negative territory.

Tata Consultancy Services (TCS) led the decline among large-cap IT names and was among the biggest contributors to the fall in the benchmark Nifty index.

According to market data, TCS alone accounted for nearly 45 points of Nifty's decline, while Infosys contributed another 35 points to the benchmark's fall.

Mid-cap IT stocks also under pressure

Selling pressure was not limited to frontline companies. Shares of TCS fell around 8 per cent from recent highs, while LTIMindtree declined nearly 7 per cent. Coforge, Persistent Systems and Tech Mahindra also witnessed losses of around 5 per cent each as investors trimmed exposure across the sector.

Analysts said the correction appears largely driven by profit booking rather than any deterioration in business fundamentals. However, global technology trends, AI-related spending and demand signals from key US clients will remain critical factors for the sector's near-term performance.

With IT stocks having significantly outperformed the broader market over the past few weeks, traders may continue to remain cautious until fresh triggers emerge from global technology markets and corporate commentary.