Profit Booking Hits IT Shares as Earnings Season Approaches
Indian information technology stocks came under pressure in Thursday’s session as investors booked profits ahead of the December quarter earnings season, reflecting caution over near-term growth visibility. Shares of leading IT companies declined by up to 3 percent, dragging the broader Nifty IT index lower, with nine of its ten constituents trading in the red.
The selling pressure emerged just days before the Q3 results season kicks off on January 12, when Tata Consultancy Services and HCLTech are scheduled to announce their earnings. Market participants appear to be positioning portfolios defensively, anticipating another quarter of subdued performance.
Large-Cap IT Names Lead the Decline in Intraday Trade
Tata Consultancy Services led the decline, slipping as much as 3 percent intraday. Oracle Financial Services Software dropped nearly 2 percent, while Wipro and Tech Mahindra fell over 2 percent each.
Mid-tier IT stocks also mirrored the weakness. Shares of Coforge, Mphasis, LTIMindtree, and Persistent Systems declined up to 2 percent, highlighting broad-based selling across the sector.
Also Read : India Poised to Beat Global Markets in 2026, With FII Outflows Expected to Stabilise: Poll
Brokerages Expect Tepid Revenue and Profit Growth in Q3
According to estimates from nine brokerages, the December quarter is likely to be another muted one for Indian IT companies. On average, the top six IT firms by revenue are expected to post around 4 percent year-on-year revenue growth and a 5 percent rise in profits, a slowdown from the 6.5 percent revenue growth reported in the September quarter.
Brokerages cite weak demand in the United States, year-end client shutdowns, and cautious enterprise spending as key reasons for the subdued outlook. Indian IT firms last reported double-digit revenue growth in the March quarter of 2023, when post-pandemic digital transformation and cloud adoption drove strong deal activity.
US Macro Headwinds Continue to Weigh on the IT Sector
The $283-billion Indian IT industry continues to grapple with multiple macroeconomic challenges. Uncertainty around US tariffs, concerns over proposed visa fee hikes, and subdued technology spending amid fears of an economic slowdown in the US remain key overhangs.
The US market accounts for a significant portion of revenues for Indian IT exporters, making the sector highly sensitive to changes in American corporate spending. “Client caution in the US has delayed discretionary tech spending, and that impact is clearly visible in deal conversions,” said a senior market analyst.
Accenture Results Offer AI Optimism but Near-Term Caution
Sector bellwether Accenture recently beat Wall Street expectations, supported by demand for artificial intelligence-led solutions. However, the company maintained its overall growth outlook, signaling that while AI is a strong long-term driver, near-term conditions remain challenging.
Although India lacks pure-play AI companies, domestic IT firms are increasingly shaping AI strategies through acquisitions, partnerships, and platform-based offerings. Brokerages expect AI-related momentum to build gradually over the next six months, with a more visible impact on revenue growth likely in 2026.
Heavy FII Selling Adds to Sector Underperformance
Foreign investor sentiment toward IT stocks has remained weak. In 2025, foreign institutional investors pulled out a record $8.5 billion from Indian IT stocks, accounting for nearly half of total foreign outflows from domestic equities.
This sustained selling pressure contributed to the Nifty IT falling 12.6 percent in 2025, making it the worst-performing sector. The underperformance came even as Indian markets lagged broader Asian and emerging market peers.
Company-Wise Expectations Ahead of Key Earnings Announcements
Brokerage estimates suggest Tata Consultancy Services may report around 4.2 percent year-on-year revenue growth for the December quarter, slower than the 5.6 percent growth seen a year earlier. Infosys is expected to post revenue growth of about 8.1 percent, while HCLTech may report growth of roughly 4.6 percent.
Most brokerages do not expect HCLTech to revise its FY26 revenue growth guidance of 2–3 percent, nor do they anticipate Infosys raising its current forecast of 3–5 percent, reinforcing expectations of a cautious management commentary.
Impact on Traders and Investor Portfolios in the Near Term
For short-term traders, the sector-wide sell-off suggests continued volatility around earnings announcements. Stock-specific reactions could be sharp, depending on deal wins, margin commentary, and outlook statements.
For long-term investors, the recent correction has raised important considerations:
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IT stocks may remain range-bound until demand visibility improves
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AI-related growth drivers could support earnings from 2026 onward
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Portfolio diversification is crucial given sector-specific headwinds
As one brokerage analyst put it, “The sector is in a waiting phase—near-term pain, but long-term promise remains intact.”
Outlook Remains Cautious as Earnings Season Sets the Tone
In the coming days, market sentiment toward IT stocks will hinge on Q3 earnings commentary, particularly around US demand trends, discretionary spending recovery, and AI deal pipelines. While near-term growth remains under pressure, investors will closely track signals of stabilisation that could mark a turning point for the sector.
