- Indian IT stocks fell 2% amid global tech sell-off after US midterm elections
- TCS led losses, dropping about 3%, with Infosys and Mphasis down over 2% each
- Concerns rose over tighter US AI regulations and impact on tech investments
Indian IT stocks fell on Wednesday, tracking a broader sell-off in global technology shares after Democrats secured control of both chambers of the US Congress in the midterm elections. TCS, Infosys and Wipro were among the major losers, despite recent investor interest in Indian IT companies as an alternative to expensive global AI and semiconductor stocks.
The Nifty IT index declined 2%, with nine of its 10 constituents trading in the red. Tata Consultancy Services (TCS) was the biggest laggard, falling around 3%. Infosys and Mphasis dropped 2.21% and 2.24%, respectively, while Wipro, HCL Technologies, Coforge and Tech Mahindra lost between 1% and 2%.
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The weakness came after concerns over tighter regulatory scrutiny of artificial intelligence companies in the US weighed on global technology stocks. Investors fear that a Democratic-controlled Congress could introduce greater oversight of the AI industry, potentially affecting the pace of data-centre investments and technology spending.
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The concerns were visible across Asian markets, where chip stocks came under pressure. Nasdaq-100 futures also fell 0.8% overnight, although global equities subsequently recovered some losses.
The recent shift of investments from richly valued global AI and semiconductor companies towards traditional IT services businesses, including Indian IT firms, appears to have been largely tactical rather than a reflection of improving fundamentals.
Money Control reported that Ajit Mishra, Senior Vice President, Research, Religare Broking, attributed Wednesday's decline to profit booking and continued uncertainty over an earnings recovery.
"Weakness in global AI stocks is not automatically beneficial for Indian IT services, as it also raises questions about the sustainability of AI-led investments, particularly data-centre spending, and the potential implications of evolving regulatory and policy developments in the US," he said.
Greater productivity through AI could reduce billable hours and put pressure on contract pricing, even as the technology creates new business opportunities.
The election outcome has also raised questions about the future direction of US technology policy and interest rates. Domestic markets also surrendered early gains. The Sensex fell around 500 points from the day's high, while the Nifty slipped into negative territory.
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Profit booking came after both benchmark indices had gained around 5% over four sessions, reaching two-month highs.
For Indian IT companies, therefore, the latest decline is not simply a reaction to weakness in global AI stocks. It reflects a combination of valuation-led profit booking, uncertainty over technology spending and persistent concerns about how AI could reshape the traditional outsourcing business.
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