Shares of Indian information technology (IT) majors such as Tata Consultancy Services (TCS), Infosys Ltd., Wipro, among others in the Nifty IT pack are trading lower in trade on Wednesday, July 22 amid weak global cues that has impacted the sector sentiment. Sharp cuts in shares of midcap IT services majors such as Coforge, Mphasis, and Persistent Systems also dragged the index lower in morning trade as high sector valuations spooked investors amid a volatile market.
On Wednesday, shares of heavyweights including TCS, Infosys, Wipro, and HCLTech declined in the range of 1-2%. Shares of Perisistent Systems shed 3%, while LTM and Coforge declined over 2% each. Mphasis drew the sharpest cut as it shed nearly 5% in trade. Nifty IT index slumped 1.5% during the session. This compares to a decline of 0.7% in the Nifty 50.
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What's Driving The Tech Selloff?
The sharp correction in frontline IT companies, including Infosys, Wipro, LTIMindtree, TCS has brought valuations closer to historical averages. However, earnings risks remain because clients continue to delay spending decisions and sales cycles remain extended. Also, brokerages highlighted that major global consulting and IT players have recently trimmed their revenue and earnings guidance, signaling weaker-than-expected demand and a delay in large enterprise tech projects.
According to domestic brokerages, Indian IT stocks are falling primarily due to weak revenue forecasts from global tech bellwethers like Accenture, cautious corporate tech spending, and the disruptive threat of generative artificial intelligence (AI) to traditional outsourcing models. High sector valuations and global macroeconomic uncertainties continue to weigh on investor sentiment.
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''Weakening of the chip trade and sharp correction in markets like South Korea during the last one month are making India relatively stable and attractive from the valuation perspective. FPIs are not selling big in India now and are turning buyers on some days. Dips in the market will provide buying opportunities in fundamentally sound stocks. The outperformance of the broader market may continue in the near-term,'' said Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments Ltd.
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