Tech Stock Troubles: Nifty IT Index Plummets 3% Amid 3 Major Concerns

Tech stocks are facing a significant downturn as investors brace for substantial Q4 earnings reports next week. The Nifty IT Index has dropped nearly 3%, building on a staggering 4% decline just a day earlier, on April 3. Major players like Coforge, Wipro, Persistent, and Infosys are among the hardest hit, contributing to a nearly 7% drop in the index over the last month. Prominent brokerage firm Bernstein has downgraded its stance on the IT sector to Underweight, and ICICI Prudential has echoed this sentiment locally.

Global Trends Impacting Tech Stocks

The downturn in tech stocks aligns with a broader trend across global markets. Recently, Wall Street experienced its most drastic single-day decline since the onset of the COVID-19 pandemic.

Key Factors Behind the Decline

Here’s a closer look at the primary concerns affecting tech stocks:

Historic Decline on Wall Street
On one of the worst days for tech stocks since 2020, a wave of selling swept through the market. The announcement of tariffs by former U.S. President Donald Trump raised alarms, notably impacting major companies. Apple suffered a staggering 9% drop, while Amazon and Nvidia faced similar losses. Both the tech-heavy Nasdaq and the broader S&P 500 indices fell by 5% each.
Rising Recession Fears in the U.S.
With more insight into the implications of the tariffs, anxiety around a potential recession and inflation in the U.S. has grown. Bernstein highlights that these tariffs could significantly affect U.S. inflation rates, leading to reduced demand and increasing recession risks. Notably, former RBI Governor Raghuram Rajan has referred to the tariffs as a “self-goal” for the U.S., underscoring the potential economic fallout.
Weak Earnings Forecast for Q4
The outlook for Q4 earnings remains bleak for many IT firms. As noted by Elara Securities, there’s been little recovery in the macroeconomic landscape, particularly in the U.S., which could negatively impact performance in FY26. Analysts believe that IT companies are nearing the limits of their margin expansion capabilities due to already low attrition rates and high utilization levels. Furthermore, pricing pressures in new contracts may hinder significant margin growth. They expect Infosys to project conservative revenue growth of 1-3% for FY26, mirroring its predictions for FY25, while HCL Tech may see growth between 3-5%.

Conclusion

The tech sector is currently navigating through turbulent waters, influenced by both local and global economic pressures. As investors await Q4 earnings, the market’s reaction to these challenges will be closely monitored. Keep an eye on companies like TCS, MPHL, and LTIM, which analysts favor for their valuation stability amidst the uncertainty.