After leading the market’s recovery over the past two sessions, information technology stocks came under heavy selling pressure on Wednesday, with investors rushing to book profits following a sharp rally driven by optimism around artificial intelligence and hopes of stronger software spending.
The Nifty IT index plunged 4.66 percent, making it the worst-performing sectoral index on Dalal Street by a wide margin.
The sharp correction also dragged benchmark indices lower, with IT heavyweights emerging as the biggest losers on the Sensex.
TCS, Infosys Lead Sector Decline
Tata Consultancy Services fell 7.16 percent, making it the biggest loser among Sensex stocks.
Tech Mahindra declined 4.54 percent, while Infosys dropped 3.80 percent and HCL Technologies slipped 3.65 percent.
Together, these stocks accounted for a significant portion of the market’s losses during the session.
The sell-off marked a sharp reversal for the sector, which had gained about 7 percent over the previous two trading sessions.
Sentiment was further weighed down by weakness in the US-listed ADRs of Indian IT companies.
Infosys ADRs fell 2.5 percent overnight, while Wipro ADRs dropped more than 8 percent after strong gains in recent sessions, indicating profit booking in technology shares globally.
Profit Booking After Sharp Rally
The biggest reason behind the decline was profit booking following a strong rally.
IT stocks had witnessed aggressive buying over the last two sessions as investors cheered strong earnings from US software companies, optimism around AI spending, expectations of potential US Federal Reserve rate cuts and a weaker rupee, which typically benefits Indian IT exporters.
Global Tech Weakness Adds Pressure
Market participants said the recent rally had become stretched in the short term, making the sector vulnerable to a correction. The weakness in Indian IT stocks also reflected softer sentiment across global technology and software shares.
The recent rally had been driven by hopes that the AI boom would lead to stronger demand for software services and digital transformation projects worldwide. However, investors are now reassessing how quickly AI-related spending will translate into meaningful revenue growth, leading to a cooling of enthusiasm across the sector.
