IT stocks came under intense selling pressure in early trade on Wednesday, dragging the broader market lower as plunged sharply following the, while fresh foreign fund outflows and concerns over global uncertainties, including and escalating West Asia conflict added to investor sentiment.
Vinod Nair, Head of Research, Geojit Investments, said, “A prolonged higher-interest-rate environment may lead enterprises to remain cautious on discretionary IT spending, impacting demand visibility and revenue growth prospects for Indian IT service providers. Sentiment was further affected by concerns around newly proposed H-1B fee hikes.”
Real sting was the expanded 9-11 visa fee that kicked in today, Nitant Darekar, Research Analyst at Bonanza, added..
“Paying 4,000 dollars on every H-1B extension and 4,500 on every L-1 turns an occasional charge into a running annual bill for firms built on onshore Indian engineers, and the Street is reading that straight into margins in a sector already down roughly 24% this year,” the analyst added.
Why IT stocks are under pressure
The Nifty IT index fell nearly 3.6 per cent to 28,779.80 from its previous close of 29,883.45. At around 10.14 am, the index was trading 3 per cent lower at 29,050.75, with all counters in the red.
Technical front
Choice Broking Technical Research Analyst Hitesh Tailor said the Nifty IT index is facing near-term pressure after being rejected from the 31,900-32,000 zone, which aligns with the 200-day EMA and a multi-month horizontal resistance level. He said immediate support is at 28,700, while the 28,000-28,150 zone remains crucial for stabilisation.
Tailor added that the 31,500-32,000 zone remains the major hurdle on the upside, with a decisive breakout above this range needed to signal renewed momentum. Until then, he expects sideways consolidation with intermittent volatility. He also noted that the RSI, at around 35, indicates weak near-term momentum.
Among major IT stocks, Wipro, Infosys and TCS have seen notable profit booking and selling pressure, with most major IT stocks facing rejection from key EMAs and forming lower-high and lower-low patterns, indicating continued near-term weakness.
Choice Institutional Equities Research Analyst Kunal Bajaj said IT stocks are facing a near-term sentiment overhang from higher crude prices, hawkish Fed expectations and persistent concerns over AI-led deflation. He added that stronger US jobs data has reinforced expectations of tighter monetary policy, which could keep clients cautious on discretionary tech spending. However, underlying deal activity remains relatively resilient, making the current weakness more sentiment-driven than fundamental.
Coforge led the decline, slumping 8.6 per cent. Infosys, Tech Mahindra, HCL Tech, MphasiS, TCS, Persistent Systems, Wipro, OFSS and LTM shed up to 4 per cent.
Coforge in focus
Coforge’s sharp fall came after the IT services company said before the market opened that chairman and independent director O P Bhatt had resigned with immediate effect.
Bhatt’s exit follows concerns raised by an internal audit over the company’s board evaluation process.
The sharp correction in the IT sector likely reflects concerns over margin pressure and global uncertainties.
Global cues
Global market weakness added to the pressure. Wall Street tumbled overnight after remaining shut on Monday, with the Dow Jones closing lower by more than 600 points. The Nasdaq and S&P 500 also ended lower by 0.3 per cent and 0.6 per cent, respectively.
Domestic benchmarks also fell as Brent crude reached near $100 amid rising geopolitical tensions in West Asia.
The BSE Sensex fell nearly 655 points to a low of 74,923.08 from the previous closing level, while the Nifty 50 declined 168 points to a low of 23,466.65.