Nifty IT slides 3.7% to lowest since May 2023

What happened to IT shares on Tuesday

Indian IT stocks saw sharp profit booking on Tuesday, dragging the Nifty IT index down heavily during the session. The index fell about 3.6% to 3.7% and hit its lowest level since May 2023, according to reports cited in market coverage. The decline was broad-based, with most frontline and mid-cap IT names trading lower together. Market participants linked the move to a mix of weak earnings signals, concerns on client spending, and global risk-off cues.

The pressure was visible from early trade, when the Nifty IT index fell 2.86% to 28,490.60, placing it among the worst-performing sectoral indices on Dalal Street at that time. Separate market updates also pegged the Nifty IT index down 2.31% at 30,904.40 while the Nifty 50 index was up 0.85% at 23,977.00, highlighting how the IT pocket underperformed even when the broader market tone was not uniformly weak.

The main triggers: earnings outlook and demand worries

A key driver was a weaker earnings outlook and fears of slowing demand for traditional IT services. HSBC analysts said fourth-quarter earnings and fiscal 2027 outlooks from India’s top-tier IT firms largely missed expectations. The note also flagged that strong global artificial intelligence spending could be “crowding out” spending on traditional IT services.

That framing mattered for Indian IT because a large part of sector revenues depend on overseas technology budgets, particularly discretionary spending cycles. When visibility on demand weakens, IT stocks often see sharper de-rating compared with more domestic-facing sectors. Tuesday’s move reflected that shift in investor positioning.

OpenAI, AI spending, and the “crowding out” concern

The HSBC warning followed a major AI-related update from the US. OpenAI said it is launching a new company backed by more than $1 billion to help organisations build and deploy AI. While the announcement is not directly about Indian IT companies, it reinforced investor focus on how quickly AI deployment could change enterprise spending priorities.

Market coverage also pointed to earlier global volatility tied to AI disruption. In February, global IT stocks saw a rout after Anthropic launched new tools that heightened concerns about AI-driven disruption in the data and professional services industry. The recurring theme has been that clients may reallocate budgets toward AI initiatives, potentially delaying or reducing spends on legacy and traditional service lines.

Stock-wise fall: Infosys, TCS, Coforge and others

Selling pressure was visible across large-cap leaders and mid-cap names. Reuters cited that shares of Tata Consultancy Services, Infosys, HCL Technologies and Wipro fell between 2.5% and 4% on Tuesday.

In another set of market quotes from the day, Infosys fell 3.24% to Rs 1,138.90 and TCS declined 2.76% to Rs 2,326.80. Coforge slipped 3.23%, Persistent Systems fell 3.12%, and Mphasis declined 3.06%. Other declines cited included Tech Mahindra down 2.81%, LTIMindtree down 2.80%, HCLTech down 1.98% and Wipro down 1.67%. Infosys was also reported to have hit an intraday low of Rs 1,137.10, while TCS touched Rs 2,325.30.

Broader market and macro cues added pressure

The IT selloff came alongside wider investor caution driven by global growth worries and geopolitical tensions. Market commentary pointed to concerns around the fragile US-Iran ceasefire and higher crude oil prices feeding into risk aversion.

Crude was cited above $100 per barrel, with Brent around the $105 level. One update said Brent was last checked up 0.66% at $104.90 per barrel, while WTI was up 0.92% at $19.97. Higher energy prices can add to inflation and interest-rate uncertainty, which tends to hurt rate-sensitive growth stocks globally, including IT.

Rupee hits record low, but IT still falls

The Indian rupee was reported to have plunged to a fresh all-time low of 95.58 against the US dollar. Typically, a weaker rupee can support export-heavy IT companies by lifting the rupee value of dollar earnings. But analysts cited that markets were more focused on fears of slower global growth and delayed discretionary technology spending than on near-term currency benefits.

This mismatch between currency tailwinds and stock performance underscored that the day’s trade was driven more by demand visibility and risk sentiment rather than just FX translation gains.

Recent trend: a sustained drawdown in IT

The fall extended a broader period of weakness. One update said the Nifty IT index had fallen more than 8% over the past 30 days. Another piece of context came from an earlier correction phase: brokerage CLSA noted that the sector fell 12.5% in 2025, making it the biggest drag on benchmark indices, which underperformed Asian and emerging market peers.

That earlier note also cited record foreign outflows of about Rs 70,550 crore, muted corporate earnings, and continued weakness in US client spending as key drivers of the sector’s underperformance.

What brokerages and analysts flagged

HSBC’s message was centred on earnings misses and the fiscal 2027 outlooks, along with the idea that AI spending may be crowding out traditional IT services spending. CLSA, in a separate context during an earlier bout of weakness, said the correction offers an additional buying opportunity in Indian IT stocks.

Separately, a market participant comment attributed to Ponmudi R, CEO at Enrich Money, described IT sector weakness as linked to weak global technology cues and cautious investor positioning. Across reports, the common thread was uncertainty on global growth and the pace of enterprise spending.

Key numbers at a glance

Why the episode matters for investors

Tuesday’s move showed how quickly sentiment can turn for Indian IT when global cues align against the sector. Weak guidance signals, uncertainty over US rates, and headlines about accelerating AI deployment can lead to rapid sector-wide de-risking. The breadth of the fall, across both large and mid-cap names, suggested it was not driven by a single stock-specific issue.

The next set of cues investors are watching, based on the day’s coverage, includes clarity on global demand and US economic data, as well as how IT firms position their service mix as AI spending rises. For now, the market is signalling that visibility on traditional IT services demand is the key swing factor.