IT Stocks Rebound After Seven-Day Losing Streak, But Analysts Warn of Persistent Downtrend

Tech Mahindra, Wipro, Infosys Lead Gains as Nifty IT Index Rises 1.6%

Shares of Indian IT companies, including Tech Mahindra, Wipro, Infosys, and Tata Consultancy Services (TCS), staged a recovery on Monday, rising up to 3%, after enduring a seven-day losing streak. The Nifty IT index climbed 1.6%, making it one of the best-performing sectoral indices of the session. However, analysts caution that the rally is a temporary technical rebound rather than a sustainable trend reversal, as the broader downtrend in IT stocks remains intact.

IT Sector Sees Temporary Rebound, But Weakness Persists

The recovery in IT shares comes after a sharp 7.5% decline in the Nifty IT index last week, which saw Indian IT stocks mirroring the weakness in the U.S. technology sector.

• Nine out of the ten Nifty IT constituents traded in the green, with Persistent Systems being the only stock that declined, falling over 1%.
• Tech Mahindra surged 2.93% to an intraday high of ₹1,531.5, breaking its seven-day losing streak.
• Wipro gained 3.13%, climbing to ₹286.35, while Infosys advanced 2.42% to ₹1,728.60.
• TCS, the largest IT services company in India, also saw over a 1% increase, touching ₹3,523.25.

Despite the gains, market experts believe the IT sector is still in a broader downtrend.

“The Nifty IT index is approaching the 37,000-36,900 support range after last week’s heavy losses. The gains seen today should be viewed as a short-term bounce rather than a reversal of the overall market direction,” said Jatin Gedia, Technical Research Analyst at Mirae Asset Sharekhan.

He further warned that the 37,930-38,000 resistance zone could act as a ceiling for IT stocks, and any minor pullback might be an opportunity for investors to sell rather than accumulate shares.

Why Are IT Stocks Under Pressure?

The Indian IT sector has faced sustained selling pressure in recent weeks, driven by a combination of global and domestic headwinds:

1. Weakness in U.S. Technology Stocks:
   • The Nasdaq 100 has seen a sharp correction, primarily due to a sell-off in artificial intelligence (AI)-driven stocks and concerns about slowing economic growth in the U.S.
   • Since a significant portion of Indian IT revenue comes from the North American market, negative sentiment in U.S. tech stocks has had a direct impact on Indian IT firms.
2. Economic Uncertainty and Slowing Demand:
   • The U.S. Federal Reserve’s stance on interest rates and recent data showing a slowdown in global enterprise IT spending have raised concerns about lower demand for IT services.
   • Companies in key sectors such as BFSI (banking, financial services, and insurance) are tightening their IT budgets, affecting order inflows for Infosys, Wipro, and HCLTech.
3. Tariff Concerns and Rising Costs:
   • The recent announcement of higher U.S. tariffs on certain imports has added to market volatility, as investors fear that geopolitical tensions could impact IT outsourcing contracts.
   • Rising employee costs, margin pressures, and slower deal conversions have further weakened the earnings outlook for Indian IT firms.

Outlook for IT Stocks: Cautious Optimism or More Pain Ahead?

Market analysts believe that while Monday’s rebound offers a temporary relief, the overall bearish trend in IT stocks is likely to persist until global uncertainties subside.

• The Nifty IT index remains in a corrective phase, and unless it sustains above key resistance levels, further downside pressure could emerge.
• Foreign Institutional Investors (FIIs) have been net sellers in IT stocks, adding to the negative sentiment.

However, some long-term investors remain optimistic, believing that valuations are becoming attractive after the recent correction.

“Indian IT stocks had run up significantly in 2023 due to AI-driven optimism. However, recent declines have brought valuations to more reasonable levels,” said a senior market strategist at a leading brokerage firm.

“If we see signs of stability in the U.S. economy and corporate IT spending picks up, IT stocks could stage a sustainable recovery in the second half of 2025,” he added.

What Should Investors Do?

Given the volatile nature of IT stocks, analysts suggest a cautious approach:

• Short-term traders should look for pullbacks to key resistance levels (37,930-38,000 on the Nifty IT index) as selling opportunities.
• Long-term investors could consider selectively accumulating quality stocks like TCS and Infosys on further dips, given their strong balance sheets and stable client base.
• Monitoring global tech trends and U.S. interest rate policy will be crucial in assessing the next major move in the Indian IT sector.

Final Thoughts: A Temporary Relief or a Reversal in the Making?

While Tech Mahindra, Wipro, Infosys, and other IT shares managed to snap their losing streak, the overall market structure still indicates weakness. The rebound is more of a short-term technical recovery rather than the beginning of a sustained uptrend.

Until global headwinds, such as U.S. economic uncertainty, AI sector corrections, and weaker IT spending, start to subside, the broader downtrend in IT stocks is likely to persist. Investors should remain cautious and look for better entry points before making fresh investments in the sector.