Why Did IT Stocks Fall Even as the Market Stayed Positive? Rupee Strength and Analyst Downgrades Trigger Sector Sell-Off
India’s information technology sector witnessed notable selling pressure on March 5, 2026, even as the broader equity market traded in the green. The Nifty IT index emerged as the worst-performing sector of the day, declining more than 1% amid a combination of currency movements, brokerage downgrades and concerns about technology sector disruption.
Shares of HCLTech, Coforge and Mphasis led the losses within the index as investors reacted to a stronger rupee and fresh target price cuts by analysts.
Market participants said the decline highlights the growing sensitivity of IT stocks to currency fluctuations and changing global technology spending trends. The sector, which derives a significant portion of its revenue from overseas markets, often reacts sharply to currency movements and shifts in global demand.
“A stronger rupee reduces the earnings visibility of export-oriented companies, particularly IT services firms that earn most of their revenues in US dollars,” said a market analyst tracking the technology sector.
Nifty IT Index Emerges as the Biggest Sectoral Loser Despite Market Gains
While benchmark indices maintained gains during the session, the Nifty IT index declined around 1.3% to 29,909 during intraday trading, making it the weakest sectoral performer of the day.
Several key stocks within the index faced selling pressure:
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HCLTech declined nearly 2%
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Coforge dropped about 2%
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Mphasis also slipped close to 2%
Other IT companies also traded with a negative bias as investors reduced exposure to technology stocks amid fresh concerns about growth visibility.
The divergence between the broader market and the IT sector indicates that investors are becoming increasingly selective, shifting capital toward sectors that are less vulnerable to currency movements and global technology spending cycles.
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Stronger Rupee Becomes a Major Headwind for Export-Focused IT Companies
One of the biggest triggers behind the fall in IT stocks was the sharp appreciation of the Indian rupee against the US dollar.
On March 5, the rupee strengthened to 91.62 per dollar, rising about 0.6% from the previous session. The rally came after aggressive intervention by the Reserve Bank of India and improved global currency sentiment.
Currency appreciation typically creates challenges for export-oriented companies, especially those in the IT services sector.
Key impacts of a stronger rupee on IT companies include:
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Lower rupee revenue from dollar-denominated contracts
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Pressure on operating margins
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Reduced earnings growth visibility
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Potential downward revisions in analyst estimates
Since most Indian IT firms generate a large portion of their revenues from North America and Europe, currency fluctuations can have a meaningful impact on their financial performance.
As a result, investors often react quickly to sharp currency movements by adjusting their exposure to IT stocks.
Kotak Institutional Equities Cuts Target Prices for Seven Major IT Stocks
Adding to the pressure on the sector was a report from Kotak Institutional Equities, which lowered target prices for several major IT companies.
The brokerage cited concerns around moderate industry growth and rising disruption risks from artificial intelligence technologies.
“Weak transmission of technology spending to services continues to keep industry growth moderate,” Kotak Institutional Equities noted in its sector report.
The brokerage also increased its cost of equity assumptions by 50–100 basis points to reflect higher risks related to technological disruption and evolving demand dynamics.
Despite the revisions, Kotak maintained that the long-term relevance of IT services remains intact, with terminal growth assumptions largely unchanged.
Target Price Revisions Announced for Key IT Companies
Kotak Institutional Equities revised target prices for multiple IT stocks, reflecting cautious expectations for sector growth.
Key changes include:
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Persistent Systems: Downgraded to Reduce from Sell; target price cut to ₹4,615 from ₹5,900
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TCS: Maintained Buy rating; target price reduced to ₹3,090 from ₹3,675
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Infosys: Maintained Buy rating; target price reduced to ₹1,530 from ₹1,900
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Wipro: Maintained Sell rating; target price lowered to ₹190 from ₹240
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HCLTech: Rating changed to Reduce; target price cut to ₹1,425 from ₹1,680
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Tech Mahindra: Maintained Buy rating; target price lowered to ₹1,615 from ₹2,000
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Coforge: Maintained Buy rating; target price cut to ₹1,620 from ₹2,250
These revisions signal that analysts expect slower growth and increased competitive pressures within the IT services sector in the near term.
Artificial Intelligence Disruption Fears Continue to Weigh on IT Sector Sentiment
Another key factor affecting investor sentiment is the growing discussion around artificial intelligence (AI) disrupting traditional IT services models.
Recent advancements in AI tools—particularly those developed by companies such as Anthropic—have intensified concerns that automation could reduce the demand for certain IT services over time.
These fears have already triggered a sharp correction in technology stocks. In fact, IT stocks declined nearly 20% in February, marking their worst monthly performance since the global financial crisis in 2008.
However, industry experts believe that AI could also create new opportunities for IT service providers in areas such as:
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AI integration and consulting
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enterprise automation
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data analytics
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cloud-based AI infrastructure
The long-term impact of AI on the IT services industry is therefore still evolving.
Here’s What Happened Today and Why Traders Reacted
The decline in IT stocks on March 5 was driven by a combination of macroeconomic and sector-specific factors.
Key triggers included:
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Appreciation of the Indian rupee
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Brokerage target price cuts across major IT stocks
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Concerns about moderate industry growth
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Continued debate around AI disruption risks
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Profit booking after previous sector volatility
These factors led traders to reduce exposure to technology stocks even as the broader market maintained gains.
Short-term traders also reacted to analyst reports and currency movements, leading to sharp intraday declines in key IT stocks.
What Impact Did the IT Sector Decline Have on Investors?
The fall in the Nifty IT index has important implications for both traders and long-term investors.
For traders, the sector decline created short-term opportunities in derivatives and intraday trading strategies.
For investors holding IT-heavy portfolios, the drop highlighted the importance of diversification across sectors.
Key portfolio impacts include:
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Technology stocks facing short-term volatility
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Currency movements influencing earnings expectations
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Analysts revising valuation models for IT companies
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Investors rotating capital toward domestic consumption sectors
Despite near-term challenges, many analysts continue to believe that India’s IT industry remains structurally strong due to its global client base and technological expertise.
IT Sector Outlook Remains Mixed as Investors Track Currency and Technology Trends
The sharp decline in IT stocks on March 5 highlights how quickly investor sentiment in the technology sector can shift based on macroeconomic and industry developments.
While currency appreciation and analyst downgrades triggered immediate selling pressure, the long-term outlook for the sector will depend on several factors:
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Global technology spending trends
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adoption of artificial intelligence solutions
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currency movements
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corporate earnings performance
As these factors evolve, investors will continue to closely track developments in the IT services industry to assess whether the recent correction represents a temporary pullback or the beginning of a broader sector reset.
