The markets are under significant selling pressure in afternoon trade. Both the benchmark indices extended their losses. At the time of writing, the Sensex was trading at 83,712, down 520 points or 0.62%. Similarly, the Nifty slipped 142 points or 0.55% to 25,811. The broader mood was cautious as selling intensified across key sectors, especially information technology stocks.
So what exactly is dragging the market lower today?
Let’s take a look at the three main factors behind the decline.
Sharp selling in IT stocks
One of the biggest drag on the market is the sharp plunge in technology sector shares.
The Nifty IT index tumbled nearly 5% during the session. Moreover, every constituent trading in the red. Losses across the pack ranged between 4-6%.
Among the worst hit were Coforge, which dropped around 6%, and LTIMindtree, which fell about 5%.
Infosys and Tata Consultancy Services each declined roughly 5%, while Wipro and Persistent Systems also lost around 5%. Tech Mahindra, Mphasis and HCLTech fell between 4-5%.
The selling in IT stocks comes amid rising concerns over the impact of artificial intelligence on traditional business models.
Many investor fear that the rapid adoption of AI tools could disrupt existing revenue streams, especially in software services and consulting.
Globally, US financial services stocks such as JPMorgan, Bank of America and Charles Schwab fell more than 2%. Software companies like Salesforce and Intuit also declined over 4%.
Weak cues from global markets and ADR fall
Another factor weighing on sentiment is the sharp dip in American Depositary Receipts (ADRs) of Indian IT companies in the US overnight. The fall in ADRs signalled weak global investor appetite for the sector.
Concerns about US interest rates are also playing a role. Adding to the discussion, Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments, said, “The latest US jobs data indicating addition of 1,30,000 jobs last month and unemployment falling to 4.3% points to the possibility of no rate cuts by the Fed in the near-term. In India, too, it appears that the rate cutting cycle is over since growth is good and inflation is expected to inch back to the RBI’s long-term target by the end of FY 27. Support to the market has to come from earnings growth, and there are sectors like automobiles, jewellery, hotels, segments of capital goods, telecom and financials that are doing well on the earnings front and have the potential to continue to do well. Tech stocks, reeling under the Anthropic shock, are unlikely to recover soon.
“The sharp dip in the ADRs of top Indian IT companies in US yesterday, indicates that Indian IT will continue to struggle. The switch from IT to other segments will help performing stocks in performing sectors. The sharp rise in stocks like Eicher, Titan and Apollo Hospital in response to results indicate that the market will reward better-than-expected results. Even with occasional profit booking, the undertone of the market will remain resilient mainly because there is a trend of FIIs turning buyers. The fact that FIIs were buyers in six of the last seven trading sessions, indicate that at least the trend of sustained selling is over. In the near-term the market is likely to consolidate around the current levels with an upward bias,” he added.
Rising crude oil prices add pressure
Oil prices are also contributing to the cautious mood. Brent crude rose 0.5% to around USD 69.72 per barrel amid concerns over rising tensions between the United States and Iran. For India, which imports a large portion of its crude oil needs, higher oil prices can increase the trade deficit and put pressure on inflation.
Apart from IT, other sectors such as fast-moving consumer goods (FMCG), media and real estate were also trading lower. The Nifty Oil and Gas index was down about 1%.