IT stocks today: Indian IT stocks came under intense selling pressure on Tuesday, October 27, as investors reassessed the sector’s growth prospects amid rising concerns over artificial intelligence (AI), global economic uncertainty and elevated valuations. Moreover, weakness on Dalal Street added to the weakness.
The sell-off pushed the Nifty IT index down 2.3%, making it the worst-performing sectoral index of the day, compared with a 0.4% decline in the Nifty 50.
Heavyweights including Infosys, TCS, Wipro and HCL Technologies dragged the sector lower, raising questions about whether the latest correction is a temporary bout of profit-taking or a warning that the traditional IT services model faces a more challenging growth environment.
IT Stocks Crash: Infosys, TCS, Wipro Lead the Decline
Selling was broad-based across the IT sector, with several large-cap and mid-cap companies losing ground during intraday trade. TCS and Infosys fell as much as 3%, while Persistent Systems and Wipro declined more than 2% each. HCL Technologies, Mphasis, Tech Mahindra and Coforge shed more than 1% apiece. L&T Technology Services was the notable exception, trading around 1% higher.
The sharp decline came despite a strong recent performance in the sector. The Nifty IT index had gained 12% over the past month, 8% over three months and 9% over six months. However, the index remained down 12% over the past year, suggesting that the recent rebound has not yet erased the damage from its longer-term decline.
Why Are IT Stocks Falling? AI Disruption and Global Headwinds
One of the biggest concerns weighing on IT stocks is the possibility that AI-driven automation could disrupt traditional outsourcing contracts. Investor anxiety has intensified around the rapid expansion of AI platforms, including reports highlighting Anthropic’s potential $1.5 trillion valuation.
For Indian IT services companies, the challenge is more complicated than simply adopting new technology. Their traditional business models have relied heavily on deploying skilled employees for software development, maintenance, testing and other technology services, often charging clients based on the time and resources involved. If AI tools allow customers to automate more tasks with fewer employees, demand for conventional services could weaken.
Moreover, global macroeconomic conditions are adding to the strain. Brent crude has climbed towards $115 per barrel amid escalating Middle East tensions, while persistent foreign portfolio investor outflows have weighed on domestic market sentiment. Higher oil prices are particularly challenging for India because they can increase inflationary pressures, widen the import bill and complicate the outlook for interest rates and the rupee.
The Indian currency also weakened for a third consecutive session, falling 25 paise to close at 95.19 against the US dollar, according to the figures provided. The dollar index traded above 101.80, while the US 10-year Treasury yield remained below 5% for a third consecutive session. These developments leave investors balancing the potential benefit of a weaker rupee for exporters against the broader risks posed by global uncertainty and foreign fund outflows.
Fed Policy and Q2 Earnings in Focus
The next direction for IT stocks will depend on whether companies can justify their valuations through earnings growth and credible strategies for monetising AI. The US Federal Reserve’s October 27–28 meeting is a key global event, with markets expecting interest rates to remain unchanged. Consequently, investors are likely to focus more on the Fed’s guidance on inflation and future policy than on the immediate decision.
A more hawkish message could push US yields and the dollar higher, potentially worsening pressure on emerging-market equities. A more balanced tone could support a recovery, although it would not resolve the sector’s structural concerns about AI disruption.
What lies ahead?
Indian IT stocks could be gearing up for a recovery in the second half of FY27, with brokerages betting on large-deal ramp-ups, resilient earnings and the potential for a valuation re-rating despite persistent macroeconomic and AI-related concerns.
Deven Choksey Research remains positive on Persistent Systems, Tech Mahindra and Tata Elxsi, while maintaining a cautious stance on Wipro and Infosys. It expects deals signed earlier to contribute more meaningfully to revenue in H2 FY27, potentially improving growth momentum.
However, companies with greater exposure to European automotive clients and US healthcare could face relatively weaker growth. Wipro and Infosys’ manufacturing verticals are particularly vulnerable. Tier-1 IT companies’ EBIT margins are expected to remain broadly stable at 20.3%, while mid-cap firms could benefit as first-quarter cost pressures reverse.
Meanwhile, Jefferies sees scope for an IT sector valuation re-rating as earnings resilience challenges pessimistic long-term growth assumptions. In its October 21 note, the brokerage said the sector’s correction had already factored in lower growth expectations.
“With IT firms still delivering growth despite weak macro and AI deflation, investors are more willing to revisit their terminal growth assumptions,” Jefferies said.
However, a sustained recovery will depend on companies meeting FY27 and FY28 growth expectations. Weakening sentiment around global AI capital expenditure or further earnings disappointments could derail the anticipated re-rating.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
