TCS Tanks 8%, Tech Mahindra, Infosys Lead Sell-Off – Why Are IT Stocks Falling Today?

IT Stocks Today, June 3: Indian IT stocks witnessed heavy selling pressure on Wednesday, June 3, and blue-chip stocks like TCS, Tech Mahindra, Infosys, HCLTech, LTIMindtree and Persistent Systems plunged over 3-8 per cent each in afternoon trade. The frontline technology stocks were among the top-performing sectoral indices of the day, and Nifty IT index was down over 5 per cent. Nifty IT index fell 1,674.35 pts, or 5.38%, at 29,425.45 and marked an intraday low of 29,301 at 2.52 PM. The steep fall comes on the back of a sharp rally in the sector on Thursday, prompting investors to cash in on their profits.

Nifty IT Under Pressure

The sell-off was broad-based across the technology pack. At 2:45 pm:

• TCS declined 8.21% to Rs 2,246
• LTIMindtree tanked 6.55% to Rs 4,057.20
• Persistent Systems dropped 6.09% to Rs 5,137.50
• Tech Mahindra down 5.75% at Rs 1,481.10
• HCLTech was down 5.19% at Rs 1,179
• Infosys fell 3.83% to Rs 1,222.10
• Wipro shares declined 2.71% to Rs 204.16

The fall in these large-cap names had an impact on the broader market, as IT stocks have a large weightage in benchmark indices.

Selling Visible On BSE IT Index, Too

The vulnerability was not just restricted to Nifty IT index; the BSE Focused IT index also witnessed steep sell-off in the session.

The BSE Focused IT index was trading at 35,528.51 at 2:57 PM IST on June 3, down 1,908.87 points or 5.10 per cent from its previous close of 37,437.38. The index opened at the day’s high of 37,090.16 and fell to an intra-day low of 35,350.65 as investors cut positions across key IT stocks.

Why Are Tech Stocks Down Today?

Profit booking on Tuesday’s rally

Market participants attributed the decline mostly to profit-taking following a surge in technology shares on Tuesday. The sector gained traction in the last session on the back of improving global technology sentiment and optimism on earnings by large overseas technology companies.

IT stocks saw a sharp jump in a short period, and many traders opted to book profits, resulting in a broad-based correction in the sector.

Foreign selling continues

IT stocks are also affected by continuing foreign investor outflow from Indian equities. Foreign institutional investors have large holdings in large-cap technology stocks, and continued selling by foreign funds has added to the pressure on the sector.

IT stocks are among the most liquid and most widely held counters and tend to react in exaggerated fashion when foreign investors cut exposure to emerging markets.

Demand outlook still under watch

Technology companies with an export exposure continue to gain with the weaker rupee but investors remain wary of the speed of global tech spend recovery.

Market players are seeking signs of more consistent demand trends from client spending, deal wins and management commentary. Investors could remain selective on exposure to the sector until visibility improves on revenue growth outlook.

What An Investor Should Know

The recent pullback suggests that sentiment on technology stocks remains susceptible to global cues, fund flows and earnings expectations. The long-term outlook for India’s IT sector remains intact but the short-term volatility could continue as investors re-rate valuations after the recent rally.

At least for now, profit booking, foreign fund selling and concerns about the visibility of demand seem to be the key reasons behind the sharp fall in IT stocks on Wednesday.

(Disclaimer: This article is for informational purposes only and should not be considered investment advice. The views, opinions, and recommendations expressed herein are those of the respective experts. Readers are advised to consult a qualified financial advisor before making any investment decisions.)

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