.png)
1 hour ago
27
No stock data available
Nifty IT has extended its sharp decline amid mounting concerns over AI-led disruption in the technology sector. Since hitting its recent peak on February 3, the index has plunged 25 per cent, marking a deeper correction than the 20 per cent fall witnessed during the September 2008 downturn.
The sell-off has been particularly severe for individual constituents, Persistent Systems has posted its steepest weekly drop, while Coforge has seen the most significant year-to-date decline among Nifty IT stocks.
Notably, on Tuesday, Nifty IT fell 4.7 per cent in a single day, 9.1 per cent over the past week, and a steep 21.4 per cent for the month. The three-month return stands at a negative 18.9 per cent, while the one-year performance shows a decline of 23.8 per cent.
The large-cap IT pack witnessed sharp declines across all major names, with weekly, monthly and year-to-date returns firmly in the red. TCS fell 5 per cent over the past week, extending its 1-month decline to 16 per cent and year-to-date loss to 20 per cent. Infosys dropped 8 per cent for the week, 19 per cent for the month, and 22 per cent year-to-date, while HCL Technologies shed 10 per cent, 22 per cent, and 18 per cent, respectively.
Wipro slipped 7 per cent in the last week and 16 per cent over the month, deepening its YTD correction to 25 per cent. LTIMindtree posted one of the steepest corrections with a decline of 13 per cent for the week, a fall of 24 per cent for the month, and a 26 per cent year-to-date decline. Tech Mahindra also remained under pressure, down 12 per cent for the week, 21 per cent for the month, and 16 per cent so far this year.
Midcap IT stocks mirrored the weakness, registering broad-based declines across time periods. Coforge fell 12 per cent in the past week, 26 per cent over the month, and 27 per cent year-to-date, while Mphasis dropped 10 per cent, 19 per cent, and 21 per cent, respectively. Persistent Systems witnessed one of the deepest weekly corrections at 17 per cent, along with a 24 per cent monthly decline and 25 per cent year-to-date drop. OFSS fared relatively better but still posted negative returns of 6 per cent for the week, 19 per cent for the month and 16 per cent so far this year.
- AI risks outweigh near-term earnings delivery
- Jefferies sees more downside than upside.
- EPS estimates cut by 1-4 per cent; expect only 6 per cent earnings CAGR (FY26–28).
- Stocks likely to move on long-term AI impact, not quarterly earnings.
- AI to shift business mix from managed services to consulting & implementation.
- Managed services (22-45 per cent of revenue for many firms) may face revenue deflation.
- Mid-sized IT preferred for faster pivoting to AI opportunities: Coforge, Sagility, IKS. These are expected to deliver 19-25 per cent EPS CAGR (FY26-28).
- Jefferies advises being selective and cautious, preferring high-growth midcaps over large-cap IT.
- Market pricing in lower terminal growth for IT
- Large caps: 3-5 per cent terminal revenue growth implied
- Midcaps: 6-9 per cent terminal revenue growth implied
- Large-cap IT trading at 16-21 times price to equity, below historical averages
- FCF yields elevated at 4.5-6.5 per cent
- AI agents seen as structural risk to staff-augmentation model
- Street questioning sustainability of linear, headcount-led growth
- Shift toward automation, platforms & outcome-based pricing
- Revenue growth decoupling from headcount growth
- T&M still greater than 50 per cent of revenues; transition in early stages
- Focus on AI-led platforms, IP, partnerships & niche hiring
- Near-term reaction may be overdone, but structural shift real
- Nifty IT valuations nearing 15-year averages
- Indian IT premium to global peers at multi-year highs
- DII outflows may compress valuation premium
- Persistent, Coforge, TechM higher MF active weights
- AI may cause near-term deflation; volumes could rise medium term
- Debate on value capture: humans vs machines
- TCS/Infosys at almost 18x with mid-single digit growth visibility
- Valuations look expensive vs global peers
- NSEIT at slight premium to NIFTY
- FCF yields key; datacenter capex & M&A may drag actual FCF
- Reverse DCF assumes 4 per cent terminal growth
- Citi cautious on sector; flags AI, GCC, competition risks
- Prefers Infosys & HCLTech among large caps
(Disclaimer: The above article is meant for informational purposes only, and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money related decisions.)
English (US) ·