The Nifty IT index fell more than 2% due to a combination of factors like worries about a US recession and Tata Consultancy Services Ltd's weak Q4FY23 results that missed the Street's expectations.
The US Federal Reserve has predicted that the US may see a mild recession later this year, which can cause spending cuts in the IT sector.
The minutes of the Fed meeting note that inflation is still over Fed comfort levels. This indicates that it may still hike interest rates despite the turbulence in the banking industry, which could cause a recession in the US.
The Indian IT sector has huge exposure in the US and has the highest exposure to regional banks and markets there.
Analysts predict that the IT sector will experience another 8–10% decline in 2023 against the backdrop of this crisis.
At 12:30 IST, Persistent Systems Ltd, LTI Mindtree Ltd, and Mphasis Ltd slumped over 3% to 4%, and were the major laggard of the Nifty IT index.
Shares of Infosys Ltd slipped nearly 3% ahead of its Q4FY23 earnings announcement. Investors have low expectations for Infosys, the second-largest provider of IT services, which is due to release its March quarter results after market close today.
"We expect Infosys to report 0.5% quarter-on-quarter (QoQ) constant currency (CC) growth. We expect the company to report dollar and rupee revenue growth of 1.5% QoQ. On the margins front, we expect it to report a margin decline of 30 bps QoQ mainly due to headwinds of visa costs, fewer working days and seasonal weakness along with furloughs," said brokerage ICICI Direct Research in its report.
Other IT stocks, including Tech Mahindra Ltd, HCL Technologies Ltd, and Wipro Ltd, followed the weak trends.
"Following the heavyweight TCS' results , the IT index is under pressure in today's session, however, we sense this as an opportunity where dips could be bought, 28,000 is a key support and going ahead with other heavyweight lined up for the results, we sense optimism may return in this basket in the coming week," said Rajesh Bhosale - Equity Technical and Derivative Analyst, Angel One.