TCS, Infosys, HCLTech fall up to 4%: Why IT stocks are under pressure today

IT stocks snapped a five-session winning streak on Friday, with investors booking profits after the sector's sharp rally this month and global sentiment shifting back towards AI-linked chipmakers following a strong overnight rebound on Wall Street and across Asian markets.The Nifty IT index fell nearly 3% in early trade, making it the worst-performing sector on Dalal Street. Among the biggest losers were TCS, which declined 3.5%, Infosys (3.4%), Persistent Systems (3.2%), Mphasis (2.5%), Wipro (2.4%), LTIMindtree (2.1%) and HCLTech (2.1%). Coforge, which had rallied strongly over the past week, also traded lower.The weakness was also reflected among Sensex constituents, where Infosys, TCS, HCLTech and Tech Mahindra emerged as the biggest drags on the benchmark index in early trade.PROFIT BOOKING AFTER A STRONG RALLYThe immediate trigger for Friday's decline is profit booking.The Nifty IT index had rallied sharply over the past five sessions as investors rotated into Indian technology services companies amid a selloff in AI-linked semiconductor and hardware stocks globally.Despite Friday's decline, the index is still up around 15% in July and is on track for its strongest monthly performance in six years.After such a steep run-up, investors are locking in gains, particularly as global technology sentiment has begun to stabilise.THE AI TRADE HAS TURNED AGAINThe bigger reason behind the fall lies in the changing global technology narrative.For much of this week, Indian IT stocks outperformed because investors were pulling money out of AI-linked chipmakers and hardware companies amid concerns over heavy capital expenditure, stretched valuations and uncertainty over returns from AI investments.Since Indian IT companies such as TCS, Infosys, HCLTech, Wipro and Tech Mahindra do not have significant exposure to AI chip manufacturing or expensive AI infrastructure, they were seen as relatively insulated from the global AI selloff. That prompted global investors to rotate into Indian IT services companies, which benefit from an asset-light business model and relatively stable earnings.However, that trade is now reversing.Overnight, Wall Street technology stocks rallied after Microsoft and Amazon delivered strong quarterly earnings and reassuring commentary on AI spending. Their results eased concerns that hyperscalers might cut back on AI investments, reviving confidence in the long-term AI growth story.The positive sentiment quickly spread to Asia.South Korea's KOSPI jumped 14% in a record rebound, Japan's Nikkei rose more than 3%, while Chinese AI and technology indices also rallied sharply. Semiconductor and AI-linked stocks that had witnessed heavy selling earlier in the week bounced back as investors returned to the sector.Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited, said that a significant feature of recent stock market trends in countries like the U.S. and South Korea has been the unusually huge volatility in stock price movements."Tech stocks are witnessing huge volatility in response to quarterly results, expectations and unprecedented speculative trading. In South Korea, particularly, volatility is excessive. Two stocks in Kospi - Samsung and SK Hynix - which account for 52% of Kospi’s market capitalisation have been moving up and down sharply. In early trade this morning Kospi is up by 16% driven by 25% spike in Samsung and 21% spike in SK Hynix," he added. Fabien Yip, market analyst at IG, told Reuters that the market appears to be reassessing whether the earlier correction had gone too far."The AI demand story didn't really decelerate. It seems like it's still sustainable. The selloff that we saw was maybe the market overreacting to concerns around capital expenditure spending."Jacky Tang, Chief Investment Officer for Emerging Markets at Deutsche Bank's Private Bank, echoed a similar view, saying the correction reflected "a reset in expectations after an exceptional rally, rather than a material weakening of the underlying investment case."WHY THIS HURTS INDIAN ITIronically, the same factor that fuelled the rally in Indian IT stocks is now weighing on them.Earlier this week, investors favoured Indian IT because it was relatively insulated from the global AI correction. With confidence returning to AI-linked chipmakers after strong earnings from Microsoft and Amazon, some of that money is now moving back into global semiconductor and AI plays.That has reduced the relative appeal of Indian IT stocks in the short term, triggering profit booking after their recent outperformance.The decline, however, does not necessarily indicate a change in the sector's broader outlook. Indian IT companies continue to benefit from expectations of steady technology spending in the US, improving earnings momentum and renewed foreign institutional investor interest in Indian equities. Friday's fall appears to be more of a tactical reversal following a strong rally than a shift in the long-term investment case.(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)- EndsPublished On: Jul 31, 2026 09:54 IST