Dalal Street started in the red with benchmark indices opening sharply lower on Friday, with a massive dragging the broader market into the red despite supportive factors such as lower crude oil prices, easing foreign investor selling and improving domestic macroeconomic conditions.
The S&P BSE was down 635.85 points, or 0.84%, at 76,774.13, while the NSE Nifty50 fell 170.10 points, or 0.70%, to 23,997.90 as of 10:13 am. The decline snapped a strong rally that had seen the Sensex gain nearly 4.8% and the Nifty rise over 4.3% in the previous five sessions.
The culprit behind Friday’s fall was clear: IT stocks.
The , one of the world’s largest technology consulting companies.
While Accenture reported its quarterly earnings, investors were spooked by its outlook and management commentary, which suggested that demand visibility remains weak and clients continue to be cautious about technology spending.
That warning was enough to trigger a wave of selling across Indian IT stocks.
Goldman Sachs said Accenture’s results have a negative read-across for Indian IT companies because demand visibility remains weak.
Since Indian IT giants such as Infosys, , HCLTech, Wipro and Tech Mahindra derive a large portion of their revenue from global clients, especially in North America, investors often view Accenture’s outlook as a leading indicator for the sector.
The impact was immediate.
The Nifty IT index plunged 6.02% to 26,752.85, making it by far the worst-performing sectoral index on Dalal Street.
Every constituent of the index traded in the red.
Infosys was the biggest casualty, plunging 8.03% to Rs 1,037.
Other major losers included:
Mphasis: down 6.21%TCS: down 6.07%Tech Mahindra: down 5.81%Larsen & Toubro Technology Services: down 5.47%HCLTech: down 5.28%Persistent Systems: down 5.21%Coforge: down 4.57%Wipro: down 3.34%
The weakness was also visible on the Sensex, where Infosys, TCS, Tech Mahindra and HCLTech emerged among the top losers. “We see a negative read-aross for Indian IT companies from Accenture’s results, given continued low visibility on demand outlook,” said Goldman Sachs’ analysts.
For a layman investor, the connection is straightforward.
Accenture works with many of the same global clients that also outsource projects to Indian IT firms.
If Accenture says clients are delaying projects, cutting technology budgets or becoming cautious about spending, investors assume Indian IT companies could face similar challenges.
This raises concerns about future revenue growth, deal wins and profit margins.
As a result, investors often react to Accenture’s earnings almost as closely as they react to the results of Infosys or TCS.
The selloff was worsened by the US Federal Reserve’s latest commentary.
Although the Fed left interest rates unchanged, policymakers indicated that inflation remains a concern and another rate hike later this year remains a possibility.
Higher US interest rates are generally bad news for technology companies.
When borrowing costs remain high, businesses tend to cut discretionary spending and delay large technology projects. That directly affects outsourcing demand, which is the lifeblood of Indian IT companies.
Dr VK Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, said guidance cuts by Accenture have triggered a selloff in Indian IT majors and their US-listed ADRs.
He added that buying interest may emerge at lower levels as valuations become more attractive after the correction.
Interestingly, the market’s fall comes despite improving macroeconomic conditions.
prices remain near multi-month lows after the US-Iran peace agreement, easing concerns about inflation and India’s current account deficit.
Foreign institutional investor selling has also started tapering, while domestic institutional investors continue to provide strong support.
Vijayakumar pointed out that improving macro fundamentals, lower crude prices and short-covering in banking stocks continue to provide a cushion to the broader market.
This is why analysts believe Friday’s decline is largely an IT-led correction rather than a sign of broader weakness in the Indian economy or stock market.
Choice Equity Broking, in its note said, “We view the quarter as a cautiously mixed read-through for Indian IT services. While continued strength in Managed Services, resilient BFSI spending and accelerating AI adoption support the medium-term demand outlook, near-term commentary remains less encouraging.”
It further added that weak bookings, elongated deal cycles, Middle East-related disruption and continued pressure on discretionary spending suggest that the recovery trajectory remains gradual rather than broad-based.
“Overall, Accenture’s commentary suggests that AI is becoming an increasingly meaningful demand driver; however, it remains insufficient to offset near-term weakness from discretionary spending pressures, elongated deal cycles and delayed large-program conversions. Therefore, we continue to expect a gradual recovery trajectory for Indian IT rather than a broad-based acceleration in FY27. Within Tier-1, we prefer INFO and TECHM and among mid-caps we have PSYS and COFORGE as our preferred ideas,” it added.
The sharp fall has undoubtedly hurt sentiment, but analysts do not see it as a structural problem for the sector.
The key question now is whether Accenture’s cautious outlook signals a prolonged slowdown in technology spending or merely reflects short-term uncertainty.
Investors will closely watch upcoming earnings commentary from Infosys, TCS, HCLTech and Wipro for clarity on demand trends, deal pipelines and client spending patterns.
For the broader market, crude oil prices, FII flows and developments at Reliance Industries’ AGM will remain important near-term triggers.
(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)