Nifty IT Falls 4%; TCS Hits 52-Week Low, TechM & Persistent Drop 6%
Shares of information technology (IT) companies are facing challenges, with the Nifty IT index dipping 4 percent on the National Stock Exchange (NSE) during Friday's intra-day trade due to concerns regarding the potential slower global economic growth. U.S. markets went down on Thursday where they were burdened by chipmaker Nvidia's dive after a quarterly report that did not boost Wall Street's AI rally.
Shares of Tata Consultancy Services (TCS), the sector behemoth, have registered a fresh 52 week low of Rs 3484, a drop of 3.6 percent on the NSE cash segment intra-day. Since the start of the November month this is the lowest that the stock has been quoting at. The portions of Tata group, Tata Technologies are also suffering (down 6 percent at Rs 669.60) and Tata Elxsi (down 3.3 percent at Rs 5,376.95) have in general also hit their respective 52 week lows on intraday NSE trades. Meanwhile, Tech Mahindra (down 6% at Rs 1497.20), Persistent Systems (down 6% at Rs 5171.20), Mphasis (down 5% at Rs 2249.20), Wipro (down 5% at Rs 281.05) and LTIMindtree (down 4.4% at Rs 4663.05) were in the brackets of 4% to 6%.
The analysts’ observations reveal that a more traditional growth driver, the IT sector, is also exhibiting weak deal momentum and clients are spending more cautiously.
“Economies, especially the stock markets dislike uncertainty and that has been on the rise since the day Trump got elected to US presidency. The markets have been affected by the stream of tariff announcements by Trump and the latest one of an additional 10 percent on China confirms the market view that Trump will use his initial months of presidency to use his threats of tariffs on other countries and then negotiate more favorable terms with them. How China deals with the latest round of tariffs is some thing that still remains to be seen,” said Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services. The reduction of uncertainty in relation to the elections after the US presidential elections was favorable, however, changes in policies under the Trump regime have the potential to increase uncertainty. Kotak Institutional Equities analysts believe thus far, conversations with clients have not indicated a substantial change in their technology spending due to the increasing uncertainty under the Trump regime.
“The sluggish spending recovery and the AI adoption near-term risk has put a downside risk to revenue growth, margin estimate, as well as stock multiples. The tempered business momentum leads us to maintain a negative sentiment towards engineering research and design (ERD) firms, even when responding to stock price drop of approximately ~18-36 percent over the course of a year,” the brokerage claim in an industry report focused on IT Services sector.
On the other hand, most participants still had noticed the modestly upbeat sentiment that has marked the commentary around the last quarter of October - December in Q3. The available short term business was increasing, along with further discretionary spend in BFS. Optimism has stemmed on increased clarity that trickled in after the new US administration occupied office as well. The scenario has only gotten Worse since then, with more tariffs and counter tariffs introducing uncertainty and worsened inflation and rate cut trajectories. All of this, according to analysts at JM Financial Instituitional Securities, suggests a shift.
“In our recent conversations, we have noticed instances of pausing transformation at large US banks which the IT Services players are undertaking. This, if it becomes a trend, poses a threat to the Street’s and our FY26 growth estimates,” the brokerage claim in a sector report.