IT Index Crashes Over 12% In Three Sessions - Is This A Black Swan Moment For The Sector Or Valuation Repricing?

The Nifty IT index tumbled as much as 5 per cent on February 13, extending decline for the third straight session, as a mix of global and domestic factors unsettled investor sentiment.

Leading the decline

Why IT Stocks Crashed Today

AI-led Disruption: Analysts attributed the key trigger behind the selloff to the growing anxiety about artificial intelligence (AI)-led disruption. Recent advancements by the  American AI company Anthropic have reignited concerns that generative AI could automate portions of work traditionally handled by large, labour-intensive IT services firms. Investors worry that if enterprises adopt AI faster than expected, it may reduce the need for conventional outsourcing models, potentially challenging the sector’s long-term revenue structure.

Sell-Off In US Tech Stocks: Further, technology stocks on the Wall Street saw sell-off for the same reason, adding pressure on global tech stocks. The US-based tech-heavy Nasdaq Composite index lost 469.32 points, or 2.03 per cent, to close at 22,597.15 on February 12.

Lower Expectations of US Fed Rate Cut: At the macro level, stronger-than-expected US jobs data triggered concerns that the US Fed now might be less likely to lower interest rates. That, in turn, tends to weigh on tech spending expectations and valuation multiples.

For the March 18 policy meeting, traders now largely expect the US Fed to keep interest rates unchanged in the 3.50–3.75 per cent range.

Data from the Chicago Mercantile Exchange FedWatch Tool shows that 92.10 per cent of market participants anticipate a pause, up from 80.40 per cent just two days earlier. On the other hand, the probability of a 25-basis-point rate cut has dropped to 7.90 per cent from 19.60 per cent over the same period.

This is a developing story... Stay tuned