IT Stocks Continue Downward Trend

The Nifty IT index declined by 3.5% to a fresh 52-week low of ₹30,417.75 on Tuesday, February 24, marking the fifth consecutive day of decline. This significant drop has resulted in a 20% decline in the index for the month. The IT pack has lost a staggering ₹5.05 lakh crore in market capitalisation, according to Capitaline data, since the beginning of the month.

Declines Across the Board

All constituents of the Nifty IT index traded in the red, with Persistent Systems, HCL Technologies, and Coforge shares being the biggest losers, each down by over 4%. Infosys and TCS also declined by 3.7% and 3.5%, respectively, while Wipro's stock fell by 2.9%.

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Market Sentiment Deteriorates

The persistent fears of AI-driven disruption have led to a sharp decline in IT stocks, with the sector cracking up by 24% in a month. The selling pressure began earlier this month following the launch of Anthropic's Claude, which is seen disrupting several industries, including India's tech services sector.

Brokers Weigh In

HSBC Global Investment Research has warned of a 14%-16% gross deflationary risk from AI over the next few years to the overall IT sector revenues. Jefferies has downgraded six IT software companies, including TCS and Infosys, on concerns about likely structural changes to the business due to AI tools. CLSA has also cut its price target on eight IT stocks, citing a lack of market share gains and implying an additional 30-65% decline in sector valuations.

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