Nifty IT index hit its lowest level since May 2021 on Wednesday, July 1 at 26,098 points as KPIT shares crahsed 16% after a weak first quarter warning. The index was down more than 32% in the last 12 months and 31% year to date, while its constituents including Tata Consultancy Services, Infosys and HCLTech traded in red.
The slump in Nifty IT was led by KPIT Technolgies, falling 16.2% intraday to Rs 559.2, followed by Coforge, down 3.4% to Rs 1,398.2, Tech Mahindra slipped 3.37% to Rs 1,355.6, while Tata Technologies dropped 2.96% to Rs 661.5.
Shares of HCL Technologies fell 1.96% to Rs 1,048 and Infosys remained 0.66% down at Rs 991.6. Tata Consultancy Services shares (TCS) traded 0.44% low at Rs 2,021, while Wipro was down 0.38% to Rs 169.36.
KPIT's Revenue Warning
On Tuesday, June 30, KPIT shared outlook for Q!FY27, expecting revenue of $176.2 million, down 4.7% sequentially and around 1% year-on-year. The guidance is also about 2.3% below analyst estimates of $180.4 million, ending a 23-quarter streak of sequential revenue growth. The cited abrupt slowdown among European automotive OEMs for the weak outlook, saying recent profit warnings and deteriorating business conditions at customers resulted in project delays that became apparent only in recent weeks.
What Does Nifty IT's Fall Reflect?
Expert say note that the recent drag in Nifty IT is a result of a series of events including Accenture cutting FY26 growth guidance and KPIT's outlook.
According to Harshal Dasani, Business Head at INVasset PMS said, "The Nifty IT sinking to its lowest level since May 2021 is not a short-term correction, it is the market finally accepting what the fundamentals have been signalling for eighteen months. The index is down roughly 29% year-to-date against a Nifty decline of 9%, a spread that only opens up when a sector is repricing structurally rather than cyclically. The trigger sequence is instructive: Accenture cutting FY26 growth guidance to 3-4% in local currency, an 18% ADR decline overnight, and a cascading domestic reaction taking TCS to its lowest since June 2020 and Infosys to its lowest since September 2020. Layer on KPIT's Q1 FY27 profit warning and the message is consistent, not idiosyncratic."
Dasani added, "Even at corrected levels, large-cap IT is still trading at 22-25 times earnings on a growth trajectory now visibly below nominal GDP. Historical support levels for a sector in structural decline are not the same as historical support levels for a sector in a cyclical dip. The AI substitution risk to the traditional outsourcing revenue pool is not a five-year concern, it is a live one, and the record buybacks companies are turning to in order to defend EPS are the tell that management teams are seeing the same growth pressure the market is now pricing. The stance on the sector stays negative until either valuation compresses to the 14-16 times zone or AI-native revenue mix visibly replaces the shrinking traditional book."
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