Weaker-than-expected fourth quarter results from HCL Technologies and Tata Elxsi weighed on benchmark indices on Wednesday, leading to a sharp decline. The Sensex fell 757 points, or 0.95%, to close at 78,516.49, while the Nifty 50 dropped 199 points, or 0.81%, to settle at 24,378.10. The rupee continued to fall as well. The Indian currency closed at to 93.80, down 30 paise against the greenback.
The IT sector bore the brunt of the sell-off, with the BSE IT and BSE Focused IT indices declining by 3.66% and 3.54%, respectively. Despite the overall market closing in the red, 15 of the top 25 sectoral indices ended higher than their previous close.
Market breadth remained positive
Market breadth remained positive, with 2,440 stocks advancing against 1,838 declining. As a result, broader markets outperformed the benchmarks, with the BSE Midcap index rising 0.37% and the BSE Smallcap index gaining 0.97%.
Both foreign institutional investors (FIIs) and domestic institutional investors (DIIs) were net sellers during the session, offloading shares worth ₹2,078 crore and ₹1,048 crore, respectively, according to provisional BSE data.
Siddharth Khemka, Head of Research (Wealth Management) at Motilal Oswal Financial Services, attributed the market decline to weak global cues, renewed concerns over the West Asia conflict, and rising crude oil prices.
He noted that IT stocks witnessed selling pressure and profit booking due to challenges such as reduced spending by telecom clients, delays in deal closures amid uncertainty in the US, weak demand for discretionary projects, and margin pressures from the growing adoption of AI in traditional IT services.
Nandish Shah, Deputy Vice President at HDFC Securities, said the fall in the IT index was primarily driven by weak quarterly earnings from HCL Tech and Tata Elxsi. However, he added that the Nifty closing above its support level of 24,337 indicates profit booking within an ongoing uptrend rather than a reversal.
He also pointed out that the advance-decline ratio reflects sustained buying interest in mid- and small-cap stocks.
Khemka expects markets to remain highly sensitive to geopolitical developments and foreign investor activity. Stock-specific movements are likely to be driven by the ongoing earnings season, with results from major companies such as Infosys, Union Bank of India, Cyient, and Aditya Birla Sun Life AMC due on Thursday.
Nilesh Shah, Managing Director at Kotak Mahindra AMC, attributed recent market volatility to rising crude prices, energy uncertainty, and supply disruptions. He advised investors to adopt a bottom-up stock selection approach, avoid broad top-down bets, and maintain disciplined asset allocation while moderating return expectations.
Among the major gainers were Hindustan Unilever, which rose 2.75%, and NTPC, up 2.39%. Eternal, UltraTech Cement, and Trent also posted gains of 1.39%, 1.35%, and 0.96%, respectively. On the downside, IT stocks dominated the laggards list, with HCL Tech, Infosys, TCS, Tech Mahindra, and Mahindra & Mahindra witnessing the sharpest declines.