The Indian IT stocks are in the spotlight once again after the sharp selloff seen in US tech stocks. A day after the Nifty IT index recorded one of its sharpest declines in recent years, US-listed Infosys and Wipro ADRs clocked losses overnight as a result of the sharp downgrade for Accenture.
The latest weakness comes at a time when technology companies are already grappling with slower client spending, delayed decision-making and growing uncertainty over how artificial intelligence will reshape the traditional outsourcing business.
Let’s take a look at the key factors to watch in today’s trade –
Tech ADRs fall adds to worries across IT sector
Investor sentiment towards technology stocks weakened further overnight, with the American Depository Receipts (ADRs) of Infosys and Wipro extending their losses for a second consecutive session. Infosys ADRs fell nearly 5%, while Wipro ADRs declined over 3%.
The pressure was visible across the broader technology space as well. A US-listed software ETF dropped more than 4%, indicating that concerns are not limited to Indian IT companies but are affecting the global software sector.
Nifty IT’s sharpest setback in years
The weakness in overseas markets follows a painful session for domestic IT stocks on Wednesday. The Nifty IT index plunged nearly 6%, marking its steepest single-day fall in several years.
Large-cap names such as TCS, Infosys, Wipro and HCLTech witnessed heavy selling, while mid-cap technology stocks including Coforge, Persistent Systems and LTIMindtree also ended sharply lower.
TCS emerged as the biggest loser among frontline IT stocks. The stock dropped more than 8%, wiping out all the gains it had accumulated over the previous two trading sessions.
The AI question is getting louder
While near-term demand concerns continue to weigh on the sector, investors are also trying to understand the long-term impact of artificial intelligence on technology services companies.
This issue was a key discussion point during LTM’s Investor Day, following which Jefferies maintained its ‘Underperform’ rating on the stock and retained its target price of Rs 3,500.
According to the brokerage, the company acknowledged that AI-led disruption could potentially reduce demand for parts of the traditional IT services business. At the same time, management believes AI can unlock entirely new revenue opportunities through platform-based services, business AI solutions and digital engineering.
Jefferies noted that LTM estimates these emerging opportunities could expand the industry’s addressable market by nearly $1.3 trillion.
“LTM’s plans to pivot to outcome-based offerings require a material change to pricing and talent strategy which may not be easy to execute. In this context, its aspirations to double revenues by 2031 with 200 basis points margin expansion seem very optimistic,” added Jefferies report.
From recovery rally to fresh concerns
The recent correction is notable because most IT stocks had staged a strong rebound from their March lows.
However, the latest sell-off indicates that concerns about slowing discretionary spending and AI-driven disruption are once again taking centre stage.
“The IT sector faces a challenging near-term environment. Weak discretionary spending, delayed client decisions, and slower deal ramp-ups are driving cautious management commentary and a conservative FY27 revenue outlook. Simultaneously, pricing pressure is intensifying as clients increasingly adopt AI-led deployment models, compressing deal sizes and altering traditional outsourcing structures,” Vinod Nair, Head of Research, Geojit Investments.
“In the long-term, companies with deep client relationships, domain expertise, and meaningful proprietary AI investments are best positioned to pivot towards higher-value consulting and implementation work. However, this transition carries real margin and cyclicality risk. Broad sector recovery would only come if there is evidence that AI-led revenue is replacing, not merely supplementing, what is being lost in traditional services,” he added.