The IT sector faced renewed selling pressure on Monday, Nifty IT index falling 0.79% after a 3% gain in the previous session. Key stocks including Tech Mahindra (down 2.85%), TCS (down 1.44%), and Oracle Financial Services Software (down 1.43%) declined up to 3%, while L&T (down 1.26%), Coforge (down 1.14%), Wipro (down 0.47%), and Infosys (down 0.33%) also ended lower. Only HCL Technologies (up 0.52%) and Persistent Systems (up 0.29%) managed to close higher among the 10 index constituents. As per Mint, the IT index has been under pressure for long time due to concerns ranging from macroeconomic challenges, regulatory headwinds in the US, the AI-led disruption in the sector, and foreign capital outflow. The index closed at 28,349.60 and is down 25.73% this year, near its 52-week low.
Telecom stocks also slipped amid broader market weakness, with Bharti Airtel down 1.44% and Vodafone Idea 1.02% since Thursday, even as the Nifty rose 0.59%. Reliance Industries fell 1.62% following speculation around Jio Platforms' IPO price band. According to Nomura's latest report, the band valued Jio's equity at ₹9.8–10.3 trillion, after a 20% holding-company discount, Reliance's 66.4% stake would be worth ₹385–405 a share, about ₹136 less than Nomura's earlier valuation. Despite the lower valuation, Nomura maintained a Buy rating with a ₹1,690 target, arguing that the stock's 26% fall this year "more than compensates" and the valuation discount to JPL is unjustified. Market experts remain positive on Bharti, with J.P. Morgan maintaining an Overweight rating with ₹2,240 target and Nomura calling Bharti its top pick.
The Indian stock market is expected to open on a cautious note on Tuesday as mounting inflation concerns and geopolitical tensions weigh on investor sentiment. The Sensex declined 547.65 points, or 0.76%, to close at 71,924.68, while the Nifty 50 settled 157.10 points, or 0.70%, lower at 22,363.35. According to Ajit Mishra, SVP – research, Religare Broking, "With volatility elevated and buying conviction remaining weak, the near-term outlook continues to be cautious. We thus reiterate our preference for a hedged approach, with a negative bias until the index demonstrates sustained strength above key resistance levels." The trends on Gift Nifty signal a marginally positive start, with Gift Nifty trading around 22,418 level, a premium of nearly 32 points from the Nifty futures' previous close. Asian markets traded lower, with Japan's Nikkei 225 declining 2.26% and South Korea's Kospi slipping 4.33% at open, while US stock market ended mixed with the Nasdaq Composite closing 120.27 points lower.
India's retail inflation accelerated to 5.54% in September, its highest level in the new Consumer Price Index (CPI) series. The inflation rose from 4.83% in August, marking a near-two-year high and the highest since October 2024. This inflation data adds to market concerns about economic stability and monetary policy implications. Crude oil prices fell after gaining by nearly $2 a barrel in the previous session, with Brent crude futures declining 0.52% to $106.10 a barrel and US West Texas Intermediate crude futures falling 0.46% to $93.31 a barrel. The combination of elevated inflation and volatile energy prices continues to create uncertainty in the market.
The IT sector's performance has been significantly weaker compared to the broader market over both short and long-term periods. Over the last five years, the IT index has delivered a negative return of 16% compared to a 22% jump in equity benchmark Nifty 50. Year-to-date, the IT pack is down 25% compared to a 14% fall in Nifty. According to Mint, stocks such as Wipro (down 39.5%), Infosys (down 37%), TCS (down 34%), and HCL Technologies (down 25%) have lost heavily this year, while Tech Mahindra (down 8.50%) and Persistent Systems (down 8%) are also down significantly. However, Oracle Financial Services Software (up 35%) and Coforge (up 11.5%) have bucked the trend this year.
Market experts remain cautious about the IT sector's near-term prospects, with Pankaj Pandey, head of research at ICICI Securities, stating it is not the right time to buy IT stocks due to too much uncertainty related to the macro challenges, AI, and other factors. Sumit Pokharna, SVP- Fundamental Research at Kotak Neo, noted that while IT sector's valuations have corrected significantly, and many concerns related to AI and revenue growth appear to be priced in, making valuations attractive, investors need to be stock-specific as challenges galore. Pokharna highlighted that geopolitical uncertainties, rising inflation and higher US bond yields are creating pressure, while revenue visibility remains weak, and order books are not growing as expected. As per Mint, a significant portion of technology spending is being directed towards AI, leaving a smaller share of budgets for traditional IT services.
