IT Stocks Carnage Wipes Out ₹3 Lakh Crore as Markets Tumble

Markets Witness Sharp Sell-Off

Indian equity markets experienced a significant downturn, with benchmark indices Sensex and Nifty 50 recording substantial losses. The sell-off was broad-based, erasing over ₹3 lakh crore in investor wealth and pulling the total market capitalisation of BSE-listed firms down. The 30-share BSE Sensex plunged over 1,000 points, settling at 82,225.92, while the NSE Nifty 50 index slipped below the crucial 25,500 mark, closing at 25,424.65. The market decline was driven by a combination of domestic and international factors, creating a cautious environment among investors.

IT Sector Leads the Decline Amid AI Fears

The primary catalyst for the market plunge was a severe sell-off in the information technology sector. The Nifty IT index crashed by more than 5%, marking its steepest weekly fall in a year. This decline wiped out nearly ₹3 lakh crore in market capitalisation from the IT index alone. Frontline IT companies, including Infosys, TCS, HCLTech, Wipro, and Tech Mahindra, were among the top losers on the Nifty. The pressure on these stocks intensified due to renewed global concerns that advancements in artificial intelligence, particularly generative AI tools, could disrupt the industry's traditional labor-intensive business models. This fear triggered a widespread risk-off sentiment toward the sector, which holds a significant weightage of 10.83% in the Nifty 50 index.

Weak Global Cues Amplify Negative Sentiment

The downturn in domestic markets was exacerbated by weak signals from global equities, particularly Wall Street. US technology stocks witnessed a sharp sell-off, with the tech-heavy Nasdaq Composite index falling more than 2%. Major tech companies like Nvidia, despite strong results, saw its share price decline. Google-parent Alphabet and Amazon also closed lower. This negative performance in US markets, driven by stronger-than-expected jobs data that dampened hopes for an early Federal Reserve rate cut, directly influenced investor sentiment in India and other Asian markets.

Domestic Headwinds Add to the Pressure

Several domestic factors contributed to the negative market mood. Persistent selling by Foreign Institutional Investors (FIIs) has been a key concern. FIIs net sold Indian equities worth nearly ₹3,466 crore in a single session, indicating a cautious stance from overseas investors. Although Domestic Institutional Investors (DIIs) remained net buyers, the outflow from foreign funds dampened overall sentiment. Furthermore, the Indian Rupee continued its decline against the US dollar, settling lower at 90.95. A depreciating currency often raises concerns about capital outflows and imported inflation. Adding to this, a rise in global crude oil prices, with Brent crude climbing to USD 72.13 per barrel, poses a risk for India as it can widen the trade deficit and fuel inflationary pressures.

Market Performance Summary

Geopolitical Tensions and Rising Volatility

Renewed geopolitical risks in the Middle East, particularly the heightened tensions between the United States and Iran, also played a role in unsettling the markets. The uncertainty surrounding negotiations over Iran's nuclear program has kept investors on edge. This cautious sentiment was reflected in the India VIX, the market's volatility index, which surged by over 15% to 13.5. A significant jump in the VIX signals heightened fear and uncertainty, prompting many investors to reduce their exposure to equities and wait for clarity.

Market Outlook and Key Levels

Analysts suggest that the market is currently in a consolidation phase, with volatility expected to remain high due to uncertain global cues. According to market experts, the Nifty has immediate resistance placed at 25,650, and a sustained move above this level would be necessary to signal a pause in the current corrective trend. On the downside, a breach of the 25,327 level could open the path for further declines towards the support zone of 25,100-25,200. Traders have been advised to remain selective and focus on fundamentally strong stocks during market dips, while fresh long positions are recommended only after a confirmed breakout.

Conclusion

The sharp fall in Indian stock markets was a result of multiple converging factors. A severe correction in the IT sector, driven by global fears around AI disruption, was the primary trigger. This was compounded by weak global market performance, persistent FII selling, a depreciating rupee, and rising geopolitical tensions. The significant spike in market volatility indicates that investors are likely to remain cautious in the near term, closely monitoring global developments and domestic economic indicators for future direction.