Indian technology stocks are poised to face challenges in Monday’s trading session, as a significant sell-off in Asian markets and a sharp drop in U.S. futures over the weekend have raised concerns. This downturn is primarily influenced by ongoing tariff disputes and economic uncertainties, particularly fears of a recession in the United States.

Current Trends in IT Stocks

For the past few sessions, Indian IT stocks have been on a downward slope, largely due to worries about an economic slowdown in the U.S. coupled with stagnant growth in large contract wins.

Key Factors Pressuring Tech Stocks

Here are four critical reasons behind the current pressure on technology stocks:

1. Weak Technical Signals: The Nifty IT index has recently broken through a widening wedge pattern, creating a weekly Marubozu candle that signifies its second-largest weekly decline since March 2020. Notably, the index has fallen below its 200-week moving average (WMA) for the first time in over three years. Anand James, Chief Market Strategist at Geojit Investments, notes that historically, this has only occurred seven times in the past fifteen years, and it typically takes an average of five weeks for the index to recover above this average.

2. Historical Recovery: Interestingly, James points out that on six out of those seven occasions where the index dipped below the 200 WMA, there was an average 12% recovery in the following three months.

3. U.S. Market Decline: The U.S. tech sector is also experiencing significant losses. The Nasdaq Composite plummeted by 5.8%, settling at 15,587.79, following a previous drop of 6%. This downturn has pushed the index down 22% from its December peak, marking a bear market phase.

4. Global Economic Concerns: Investors are increasingly worried that the actions of the U.S. administration could trigger a global recession, which may dampen demand and inflate prices, slowing down growth. The IT sector has already been feeling the squeeze from high U.S. inflation rates, which have adversely affected its revenues in recent quarters. Furthermore, expectations for imminent Federal Reserve interest rate cuts appear to be fading.

April’s Historical Context for IT Stocks

The upcoming week is crucial for Indian tech stocks, particularly as Tata Consultancy Services prepares to launch the Q4 earnings season. Historically, April has not been a favorable month for the IT sector in the post-COVID landscape, adding to the uncertainty surrounding market performance.

As investors brace for what could be a tumultuous Monday, the focus will be on how these factors will influence stock movements and market sentiment in the coming days.