IT Stocks Plummet Amid Rising Concerns Over Artificial Intelligence Disruption

Indian IT Sector Stocks Decline Amid AI Buzz

On Thursday, June 4, the Indian IT sector stocks continued to fall, sparking concerns among investors about the sector's future growth prospects. Tata Consultancy Services (TCS), a leading player in the industry, saw its share price drop nearly 1% to ₹2,216 apiece on the National Stock Exchange (NSE), following a single-day fall of 9% in the previous session. This decline marks the worst single-day fall for TCS since early 2020.

Infosys, another prominent IT company, also witnessed a decline in its share price, plummeting 1.21% to ₹1,207.80 per share. Wipro's share price dropped over 0.50% to ₹204 apiece, while other IT stocks such as Coforge, Mphasis, HCLTech, and LTIMindtree followed a similar downward trend. Coforge declined 2.1% to ₹1,391, Mphasis slipped 1.9% to ₹2,245, HCLTech fell 1.8% to ₹1,158, and LTIMindtree dropped 1.3% to ₹4,000.

In contrast, Tech Mahindra outperformed its peers, gaining up to 1.3% to ₹1,491. The Nifty IT index also continued its losing streak, falling over 0.53% to 29,274. The index tumbled nearly 6% on Wednesday, recording its sharpest one-day decline since at least 2020, with every constituent ending in the red, with losses ranging between 3% and 9%.

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According to Anshul Jain, Head of Research at Lakshmishree, the IT Index continues to trade within a broad consolidation range, with key support placed between 28,288 and 28,677 and resistance near 32,134.

The decline in IT stocks can be attributed to factors beyond concerns over AI disruption. Harshal Dasani, Business Head at INVasset PMS, noted that the weakness in the IT index extends beyond AI concerns. Dasani described the sharp decline as the market signaling that the recent recovery was "more of a dead cat bounce than a genuine trend reversal." He added that when a sector is delivering only low single-digit growth but continues to command mid- to high-teen earnings multiples, such valuations become increasingly difficult to justify.

On the technical outlook, Jain observed that the structure in the IT index is beginning to show signs of stabilization, as the previously falling moving averages are flattening out and hinting at a potential trend transition. "This suggests that downside momentum is gradually fading and support zones are becoming increasingly resilient. While a decisive breakout above the upper range is still required to confirm a bullish reversal, the current setup indicates that downside risk appears capped around the identified support band unless fresh negative triggers emerge," Jain added.

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