Why IT Stocks Decline?

IT companies' stocks, especially in India, like TCS, Infosys, and Wipro, have been falling due to a mix of global worries, policy changes, and new tech threats. This decline shows up in the Nifty IT index, which has dropped sharply, even as other markets hit highs.

AI Disruption Fears

New AI tools from companies like Anthropic are automating jobs that Indian IT firms handle, such as data analysis and document reviews. Investors worry this will cut demand for outsourcing services, as clients use AI rather than hire firms like Infosys or TCS. Recent launches deepened the sell-off, with stocks dropping up to 8% in a day.

US Policy Pressures

US President Trump's tariffs on imports and higher H-1B visa fees raise costs for Indian IT companies that rely on US clients for most revenue. These moves could slow US spending on tech services and force more expensive local hiring. Fears of a US recession add to this, as businesses cut back on contracts.

Weak Client Demand

Global clients are spending less on non-essential tech projects amid economic slowdowns and high interest rates. Earnings reports show slow growth, like TCS's revenue dip, leading to more selling.

High Valuations Exposed

IT stocks traded at premium prices despite flat growth, making them easy targets when bad news hits. Global tech sell-offs, like in the Nasdaq, pull Indian IT down too, as they follow US trends.

Other Factors

Rising salary costs, wage hikes, and talent shifts to in-house centers hurt margins. Muted quarterly results and cautious outlooks keep pressure on. While some see turnaround potential from low valuations, sentiment stays weak.