The Nifty IT sub-index experienced a sharp decline of over 3% on Wednesday, making it the biggest sectoral laggard in the Indian market. This significant fall was driven by widespread selling pressure across major technology stocks.
Technical Outlook Signals Pressure
According to Hitesh Tailor, Technical Research Analyst at Choice Broking, the near-term trend for the Nifty IT index remains under considerable pressure. After a strong recovery from the 26,250 support zone, the index faced rejection from the 31,900–32,000 zone, which aligns with its 200-Day EMA and a multi-month horizontal resistance level.
This rejection has led to a fresh retracement. Tailor indicated that immediate support for the index is around 28,700, with a crucial support area between 28,000–28,150. Sustaining above this zone could help the index stabilize. On the upside, the 31,500–32,000 zone represents a major hurdle; a decisive breakout above it would signal renewed upside momentum. Until then, sideways consolidation with intermittent volatility is expected.
Major IT Stocks Face Selling Pressure
Individual IT giants like Wipro, Infosys, and TCS have witnessed notable profit booking and selling pressure in recent weeks. The latest fall saw these stocks open with gap-downs, followed by further selling during the trading session. Many major IT stocks are reportedly facing rejections from key Exponential Moving Averages (EMAs) and are forming lower-high and lower-low patterns, indicating continued weakness.
AI Concerns and US Interest Rate Outlook Weigh Heavily
Ponmudi R, CEO of Enrich Money, highlighted two primary factors contributing to the sector's sharp decline: long-term implications of rapid advancements in artificial intelligence (AI) and concerns over the US interest rate environment.
The launch of OpenAI's GPT-6 Astra has reignited fears that increasingly capable AI models could encroach on functions traditionally performed by specialized software companies. This has prompted renewed selling across technology stocks as investors reassess the future landscape of the software industry.
Additionally, the sector remains under pressure due to investor worries that US interest rates could stay higher for longer. This concern comes ahead of key US inflation data expected later this week. A prolonged period of tighter financial conditions is anticipated to weigh on discretionary technology spending by US-based companies, which are a critical demand driver for Indian IT exporters.
The combination of AI-led disruption concerns and a more challenging macroeconomic backdrop has added to anxieties regarding the Indian IT sector's medium-term growth outlook.