Nifty IT slumps over 2%: Persistent Systems, Mphasis, Infosys fall up to 5%

The Nifty IT index fell around 1,066.30 points or 2.42 per cent intraday on the last trading day of the year at 42,905.10. The sector faced broad-based selling pressure as all major constituents were trading in the red.

 

Persistent Systems led the decline, plunging 4.78 per cent to Rs 6,320.50. Mphasis also fell sharply, down 3.38 per cent at Rs 2,836. Coforge dropped 2.77 per cent to Rs 9,546, while Infosys was 2.50 per cent lower at Rs 1,858.40. Tech Mahindra and Tata Consultancy Services (TCS) were also among the major laggards, slipping 2.19 per cent and 2.38 per cent to Rs 1,702.65 and Rs 4,059.85, respectively.

 

Other constituents, including Wipro (-1.93 per cent), HCLTech (-1.55 per cent), LTIMindtree (-1.68 per cent), and L&T Technology Services (-1.03 per cent), also posted losses amid subdued investor sentiment in the IT space. 

According to technical experts, Nifty IT is exhibiting a bearish divergence, indicating weakening momentum and justifying its ongoing decline.  "This divergence typically occurs when the price forms higher highs, but the technical indicators (RSI) show lower highs, signalling potential trend reversal or correction. Looking ahead, the index is likely to face sell-on-rise pressure, with a downside target of 40,500 in focus. Any recovery or bounce from current levels should be seen as an opportunity to book profits rather than initiate fresh longs, as the overall trend remains bearish in the short to medium term," said Jigar S Patel, senior manager - technical research, Anand Rathi Shares and Stock Brokers.

 

Patel advised investors and traders to exercise caution and avoid long positions until the index stabilises and shows signs of reversal from key support levels. 

The IT sector's underperformance also comes after Wall Street extended its losses overnight on Monday, as investors weighed multiple factors, including end-of-year tax adjustments, rising Treasury yields, and uncertainties about 2025. 

 

The tech heavy Nasdaq Composite fell the most, declining 1.19 per cent. Meanwhile, the Dow Jones Industrial Average slipped 0.97 per cent and the S&P 500 shed 1.07 per cent.

 

IT sector outlook

 

Analysts at Motilal Oswal expect that seasonal furloughs will impact growth in the third quarter of financial year 2024-25 (Q3FY25) for the IT sector. However, looking beyond the seasonal effects, macroeconomic uncertainty is gradually easing, and the outlook for technology spending is anticipated to improve in CY25.

 

While the initial phase of recovery in 1HFY25 was slow, there are now clear signs of acceleration, the brokerage said.

 

“The recovery appears to be broadening beyond the US BFSI sector—which continues to show strength—into other industry verticals, such as HiTech, which is recovering faster than expected,” it said in a preview note.

 

The analysts foresee tier-2 companies continuing to outpace tier-1 firms in growth during the quarter. The key catalyst for the sector will likely emerge after Q3FY25, when client budgets for CY25 are finalised, and the extent of changes in client behavior becomes more apparent.