“The long-term charts of all three major IT stocks look distorted, and it is evident that money is moving out,” said Himanshu Gupta, Head of Research – Retail Broking at Jainam Broking. “All three stocks are trading below their respective 200-week moving averages and making lower cyclical lows — a rare development in India’s IT sector — suggesting they are in long-term downtrends.”
The analyst remains underweight on all large-cap IT stocks and believes this sector is not only likely to witness further price correction but a time correction, where investors might not be able to get any meaningful returns over the next 2-3 quarters.
TCS, Infosys, and HCL Tech all reported Q4 FY2026 results showing mixed revenue growth amid macroeconomic caution. Strong margins at TCS offered little comfort as softer guidance from peers weighed heavily on sentiment.
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The selloff accelerated on Friday after Infosys released its quarterly numbers. “Nifty IT witnessed a return of bears as the index attracted heavy selling following the quarterly numbers from Infosys,” said Rupak De, Senior Technical Analyst at LKP Securities. “The RSI has entered a bearish crossover and is falling.” De sees support at 25,500 and resistance at 32,000, cautioning that the index may continue sliding toward lower levels.
The Nifty IT index has now corrected roughly 25% since the start of the calendar year. Prabhudas Lilladher argues the scale of the decline is disproportionate to underlying fundamentals, attributing it primarily to market fears around artificial intelligence disruption. The brokerage points to data from ISG showing only about 30% of AI use cases reach the implementation stage, with early-stage enterprise adoption still hampered by fragmented data architecture and process gaps — a phenomenon it describes as the “AI Death Valley.”Yet Prabhudas Lilladher sees a structural silver lining. As pilot-to-production conversion rates improve, it expects mid-cap IT companies like Persistent Systems, Coforge, and Mphasis to outperform large-cap peers, mirroring dynamics seen during earlier cloud and digital transformation cycles. Smaller employee bases, faster reskilling capacity, and more agile operating models, it argues, structurally advantage mid-caps over their Tier-1 counterparts burdened by what the brokerage calls “talent debt.”
Emkay’s model portfolio reflects similar caution at the large-cap end, maintaining an underweight position on technology with just 7% weightage, holding only Infosys and HCL Tech within the sector.
FIIs have been the biggest bears in the IT pack and have sold nearly Rs 20,000 crore worth of their stake in the sector this year till mid-April.
For now, with technical indicators broken and institutional conviction thin, India’s once-favoured IT trade is firmly in retreat.
(Data: Ritesh Presswala)
(Disclaimer: The recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times.)