Infosys, HCL Tech, Wipro And Other Tech Stocks Crash, Pushing Nifty IT Into 'Bear Territory'

Shares of major technology stocks such as Infosys, HCL Tech, and Wipro crashed on Wednesday, March 12. All ten constituents of the Nifty IT index traded in the red, pushing the index down by more than 4 per cent during today's session. This sharp decline has now pushed the IT index into the bear market territory.

An index or stock is considered in bear market territory when prices decline 20 per cent or more over a sustained period of time, often accompanied by negative investor sentiment and a weakening economy.

Nifty IT index has declined nearly 22 per cent to 35,940.80 from its all-time high of 46,088.90 hit in mid-December 2024.

Why IT stocks are falling?

Concerns about a potential recession in the US have caused investors to worry about the growth prospects of these companies. The US, being the largest market for most Indian IT firms, is at the centre of these concerns.

Sumit Pokharna, VP-Fundamental Research, Kotak Securities said, "Fear of tariffs are mounting, concern of US slow-down is rising, expectations of inflation uptick, uncertainty on rate cut by fed, delays in decision making on IT spend by US customers, healthy IT order pipeline was build-up but conversion stuck in a limbo, and increased competitive intensity for large deals could pressure pricing are not conducive factors for Indian IT sector. IT sector stocks are nursing steep losses due to the above mentioned factors."

The decline in tech stocks today, however, was triggered after Morgan Stanley and Motilal Oswal came out with their reports on the future outlook of the IT sector.

Morgan Stanley, in its note, said that the shifting global macroeconomic environment and technological changes are posing risks for the IT sector, putting revenue growth and valuations at increasing risk.

The international brokerage firm also noted that despite the ongoing market correction, the relative valuations of IT stocks compared to the Sensex are still at their five-year average.

Motilal Oswal mentioned in its note that the sentiment has turned cautious from January to March, with enterprises adopting a "wait-and-watch" approach. The domestic brokerage firm also observed that while the focus has not yet shifted away from capital expenditure (capex), clients are still not prioritizing spending on services. The brokerage added that a meaningful improvement in discretionary spending in fiscal 2026 is no longer certain compared to the current fiscal.

Tech Stocks Receive Major Downgrades

Leading the losses, Infosys share price fell nearly 6 per cent to hit the day’s low at Rs 1,563.80, which is also its eight-month low. Wipro fell up to 5.6 per cent to Rs 262.20, its lowest level in five months. Tech Mahindra tumbled 4.75 per cent to Rs 1,408.80, and HCL Tech shares plunged 3.9 per cent to Rs 1,507.10, both hitting eight-month lows.

For Infosys, the international brokerage Morgan Stanley downgraded it to ‘Equal Weight’, and Motilal Oswal downgraded it to ‘Neutral’. Both brokerages have cut their target prices, triggering a massive sell-off in the stock.

Morgan Stanley has maintained an 'Overweight' rating on Tata Consultancy Services (TCS) and Coforge but has cut their target prices. The international brokerage also maintained 'Equal Weight' on HCL Technologies and Tech Mahindra, while cutting their target prices.

Morgan Stanley said it prefers TCS over Infosys, Coforge over Mphasis, and Tech Mahindra over HCL Technologies.

Motilal Oswal also downgraded Wipro to ‘Sell’ and L&T Technologies to ‘Neutral’ citing valuation discomfort.