Why Are IT Stocks Plummeting? Insights on the Nifty IT Index's Dramatic Fall

Mumbai's IT Sector Faces Major Setback

Mumbai: On Friday, the Nifty IT index experienced a significant downturn, dropping over 6% as investors reacted to Accenture's announcement of a reduced revenue growth forecast, raising alarms about the recovery trajectory of global tech spending.

The technology index saw a decline of 6.43%, equating to a loss of 1,831 points, reaching an intraday low of 26,634.50 around 10:25 AM, making it the poorest performing sector in early trading.

By the end of the session, the IT index was still down approximately 5%, or 1,500 points, settling at 26,956.90.

Leading the sell-off was Infosys, which fell by 7.4%. Tata Consultancy Services (TCS) saw a decrease of 5.6%, while Mphasis dropped 5.3%.

Other notable declines included Persistent Systems, down nearly 5%, and LTIMindtree, which slipped over 4%. Tech Mahindra and HCLTech both lost around 4.5%, while Coforge and Wipro saw declines of nearly 4% and over 3%, respectively.

The broader market also felt the impact, with technology stocks like KPIT Technologies, Tata Elxsi, Hexaware Technologies, and LT Technology Services among the biggest losers on the BSE Midcap index.

This sell-off was triggered by a steep drop in Accenture's shares and a decline in the American Depositary Receipts (ADRs) of Indian IT firms following the consulting giant's lowered FY26 revenue growth forecast.

Market analysts suggest that the guidance cuts from Accenture have led to a sell-off in the ADRs of major Indian IT companies.

Experts believe that there may be buying opportunities at lower price levels as valuations become more appealing, but they caution that pressure on IT stocks could persist if earnings downgrades continue to exceed market expectations in the near future.

Despite the recent downturn, the valuations of leading Indian IT firms remain higher than Accenture's, which is currently trading at around nine times its one-year forward consensus earnings.

Given the ongoing uncertainty, analysts advise caution regarding the sector's outlook.

Accenture's shares plummeted nearly 18% overnight, while Infosys ADRs fell about 10%, and Wipro ADRs dropped over 3%.

The company reported third-quarter revenues of $18.7 billion but lowered its annual growth forecast due to ongoing uncertainties in client spending and revenue challenges linked to developments in West Asia.

It also reported a decrease in new bookings compared to the same period last year.

The decline in IT stocks follows earlier pressures this week, influenced by indications from the US Federal Reserve that interest rates may remain high for an extended period, negatively affecting sentiment towards global tech shares.

Over the past year, the Nifty IT index has fallen nearly 30% from its peak of 38,600.

In the broader market, domestic equity benchmarks also saw declines of nearly 1% in morning trading, with the Sensex dropping over 700 points and the Nifty slipping about 200 points below the 24,000 mark.