Infosys, Tech Mahindra, TCS fall up to 3%: Why are IT stocks falling today

IT stocks fell in early trade as the Wall Street technology selloff spread to Dalal Street. Rising crude, higher US yields and geopolitical worries added to expectations of near-term volatility.

In Short

• IT stocks under pressure after Wall Street AI selloff
• Infosys, Tech Mahindra, TCS lead IT index decline
• Asian markets slide with South Korea and Taiwan hit hard

Information technology stocks remained under pressure in early trade on Friday, mirroring the sharp overnight selloff on Wall Street after disappointing earnings from Alphabet and Tesla reignited concerns over massive artificial intelligence (AI) spending. The weak global cues also dragged Asian technology stocks sharply lower, adding to the negative sentiment on Dalal Street.

The weakness in IT shares came amid a broader market selloff, with the BSE Sensex plunging more than 900 points and the NSE Nifty50 falling over 1% as Brent crude climbed above the $100-a-barrel mark, worsening concerns over inflation and corporate margins.

The Nifty IT index slipped around 0.75%, with Infosys, Tech Mahindra and TCS among the major drags.

WALL STREET AI SELLOFF SPILLS OVER TO ASIAN MARKETS

The biggest trigger for the decline was the sharp correction in US technology stocks overnight.

Wall Street witnessed a broad-based selloff after Alphabet and Tesla, the first two of the "Magnificent Seven" companies to report quarterly earnings this season, unnerved investors with their aggressive AI infrastructure spending.

Tesla shares plunged around 14% after reporting its first cash burn in two years, while Alphabet fell about 7% after announcing an additional $15 billion investment in AI, taking its total planned AI spending this year to nearly $200 billion.

The Dow Jones declined around 1%, the S&P 500 fell 1.2% and the Nasdaq slumped 2.2%, as investors questioned whether AI-related capital expenditure is running ahead of revenue growth.

The weak sentiment quickly spread across Asia.

Emerging Asian equities fell on Friday, with South Korea leading the decline. The benchmark KOSPI index plunged as much as 6.2%, putting it on track for a weekly loss of 2.4%. AI memory chip giant SK Hynix and Samsung Electronics tumbled more than 7% each, while Taiwan's benchmark index dropped as much as 2.7%, trimming its weekly gains.

The broad selloff in global technology shares spilled over to Indian IT stocks, given their close correlation with global technology sentiment.

INFOSYS, TECH MAHINDRA, TCS UNDER PRESSURE

Selling was visible across the IT pack.

Infosys was among the worst-hit frontline stocks, falling nearly 3% to around Rs 1,021. Tech Mahindra declined over 1%, while TCS slipped around 0.3%.

Mid-cap IT stocks also came under pressure. Mphasis fell 1.31%, Oracle Financial Services Software (OFSS) lost 1.05%, while HCLTech bucked the trend to trade marginally higher.

The decline in these heavyweight stocks dragged the Nifty IT index lower and added to the pressure on the benchmark indices.

RISING CRUDE ADDS TO DALAL STREET'S WOES

Apart from weak global technology cues, surging crude oil prices further dampened investor sentiment.

Brent crude climbed above the $100-a-barrel mark after attacks on Saudi oil tankers in the Red Sea intensified fears of supply disruptions amid the escalating conflict in the Middle East.

The spike in crude prices dragged the broader market lower, with the Sensex and Nifty falling more than 1% in early trade as investors worried about inflation, India's import bill and corporate profitability.

Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, said uncertainty continues to dominate the market.

"The total uncertainty and high volatility in markets continues without any signs of immediate respite. The attack on Saudi tankers by the Iran-backed Houthis in the Red Sea is the main reason for the recent sharp spike in Brent crude to about $100. Such high price is bound to revive India's Balance of Payments concerns. Rupee too has been impacted, though mildly, with the currency depreciating to 96.57 to the dollar," he said.

He added that foreign investor sentiment has also weakened.

"With the rupee weakening again, FPIs who had turned buyers on many days this month have again shifted to the sell-mode. The spike in the US 10-year yield to 4.7% is negative for equity markets globally. This is a near-term risk."

With concerns over AI spending, elevated crude oil prices, rising US bond yields and persistent geopolitical tensions weighing on global markets, analysts expect technology stocks to remain volatile in the near term.

(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)

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