Nifty IT Ventures Deeper Into Bear Territory As Index Falls For Fifth Straight Session - Know Why

The Indian stock market continued to trade under pressure on March 13. The benchmark indices closed flat with a negative bias. The 30-share Sensex shed 200.85 points or 0.27 per cent to close at 73,828.91 levels. The Nifty 50 index closed lower by 73.3 points or 0.33 per cent at 22,397.2 levels.

All major sectoral indices closed in the red on March 13 apart from Nifty Bank which closed flat up by 0.01 per cent. The Nifty IT index also witnessed significant declines on March 13. The index closed lower for the fifth straight day. In these five sessions, the index has declined by more than 5 per cent from 38,145.3 levels to close at 36122.5 levels on March 13.

Notably, the index entered the bear territory on March 12 as it fell over 21 per cent from its 52-week high levels to close at 36310.65 levels. An index is said to be in bear territory when it declines more than 20 per cent from its recent peak.

Which Nifty IT Stocks Declined The Most

Shares of Persistent Ltd, Wipro, and Coforge emerged as top losers among constituents of the Nifty IT index as they closed lower by up to 1.64 per cent. Earlier today Persistent shares fell more than 2 per cent to an intraday low of Rs 5,075 apiece on the NSE.

Other stocks such as Mphasis and LTI Mindtree also closed lower by 0.68 per cent. Index heavyweights such as Infosys, HCL Tech and Tech Mahindra dragged the index deeper into bear territory as they closed lower by 0.74 per cent, 0.56 per cent and 0.02 per cent.

Nine out of ten constituents of the Nifty IT index declined while one stock managed to buck the trend. Tata Consultancy Services stock closed in the green up by 0.08 per cent at Rs 3,509.05 apiece on the NSE.

Rajesh Sinha, a Research Analyst at Bonanza Portfolio Ltd. told Outlook Money that TCS shares managed to buck the trend after brokerage firm Morgan Stanley downgraded Infosys shares and maintained an ‘Overweight’ rating on TCS shares.

“The brokerage firm Morgan Stanley downgraded Infosys to equal weight. It further said that it prefers the shares of TCS over Infosys, keeping an ‘Overweight’ rating. As a result, TCS bucked the trend and traded in green amid selling in other IT companies,” Sinha said.

Why Are IT Stocks Declining

The Nifty IT index has continued to decline in recent sessions following reports of a potential slowdown in the US economy and President Donald Trump’s recession remarks. Additionally the imposition of trade tariffs has also contributed to the decline seen in domestic IT stocks.

Earlier in February, Trump directed the US Trade Representative and Commerce Secretary to propose levies on a country-by-country basis in an effort to rebalance trade relations.

“I’ve decided, for purposes of fairness, that I will charge a reciprocal tariff, meaning whatever countries charge the United States of America. In almost all cases, they’re charging us vastly more than we charge them but those days are over” Trump said.

Notably the Trump regime has imposed 20 per cent import duties on all products from China. The US President stated that he would also impose reciprocal tariffs on US trade partners such as India. This imposition has increased uncertainty over the economy since domestic IT companies heavily depend on revenue from US-based clients, dragging the index into bear territory.

“In the last 4 trading sessions, Nifty IT index was down due to the uncertainty and volatility triggered by Donald Trump's tariff policies. This uncertainty has led to a broader impact on global markets, with Wall Street experiencing significant declines, which in turn affected Indian equities. The Nifty IT index, heavily reliant on U.S. revenue, has been particularly vulnerable to these global economic pressures,” Sinha said.

The US President also told Fox News reporters earlier this week that the US economy is undergoing a period of transition. He did not deny the possibility of a recession when asked about the same.

“I hate to predict things like that. There is a period of transition, because what we’re doing is very big,” Trump said. “We’re bringing wealth back to America. That’s a big thing…It takes a little time, but I think it should be great for us,” Trump said.

Amid the possibility of a recession and economic slowdown in the US, domestic IT companies are also likely to suffer from a potential slowdown in deal signings. Notably, the number of deals up for renewal has also declined in 2024.

“The number of deals up for renewal for the domestic IT industry has been declining, 1,374 deals were up for renewal in 2023 and came down to 1,226 in 2024. IT industry, which is already facing a slowdown in deal signings, may see more pressure as US President Donald Trump's tariff war triggers fears of a recession in the US, the biggest market for Indian IT Companies,” Sinha said.