Nifty IT slides nearly 6% as three‑day rally unravels

The Nifty IT index fell nearly 6% on Wednesday, 3 June, snapping a three‑session, about 7% rebound as investors booked profits in frontline technology stocks amid renewed concerns over AI‑driven disruption and stretched valuations after the short rally.

Selling was broad based across large and midcap IT names, with Tata Consultancy Services (TCS) dropping up to 9%, Infosys sliding around 4%, and LTIMindtree and Tech Mahindra losing more than 6% intraday, according to exchange data.

Market overview

Index / Stock	Session move & context	Comments
Nifty IT index	Down about 5.8–6% to near 29,300	Worst sectoral performer; snaps three‑day, 7% rebound.
TCS	Intraday low ₹2,224.8, down about 9%	Biggest single‑day fall since March 2020.
Infosys	Around ₹1,222–1,230, down about 4%	Wipes out over ₹20,000 crore in market value.
LTIMindtree (LTM)	Intraday low ₹3,993, down about 8%	Biggest single‑day fall since January 2024.
Tech Mahindra	Around ₹1,470–1,500, down about 5–6.5%	Largest fall since February 2026.
Coforge	Intraday low near ₹1,422, down about 6–6.4%	Snaps three‑day winning streak.
Persistent Systems	Around ₹5,119, down about 6–6.4%	Biggest drop since April 2026.
Mphasis, OFSS, Wipro, HCL Tech	Down about 2.5–4%	All Nifty IT constituents close in red.

• All 10 Nifty IT stocks ended lower, erasing a chunk of recent gains.
• Sector wealth destruction estimated at over ₹1.5 lakh crore in a single session.
• TCS alone accounted for more than half of the value erosion.

From relief rally to sharp reversal

Phase	Index / stock move	Period / trigger
Prior three sessions	Nifty IT up about 7–7.6%	Valuation buying, global software earnings, AI optimism.
Monday, 1 June	Nifty IT up 2.66% to 29,854	Strong US SaaS results, CLSA note on SaaS demand.
Tuesday, 2 June	Nifty IT up about 4–4.2% to 31,116.6	Best single‑day gain in a year; “Nvidia effect”, AI trade.
Wednesday, 3 June	Nifty IT down nearly 6% to ~29,300	Profit‑taking, broader market selloff, AI deflation worries.

• Persistent Systems, Tech Mahindra, Infosys, Coforge, Oracle Financial Services, Mphasis led gains in the preceding up‑move.
• The rally followed months of underperformance: Nifty IT is down about 18–22% in 2026, versus roughly 10% decline in Nifty 50, as per index data cited in broker commentary.
• Analysts had flagged that large caps such as TCS and Infosys were trading near 16–17 times forward earnings, below 10‑year averages, drawing value buyers.

AI disruption, valuations and FII flows

Factor	Value / view	Context
AI “SaaSpocalypse” fears	Anthropic’s Claude tools seen compressing pricing	Raises questions on labour‑arbitrage model.
FII tech allocation	Around 7.3% of Nifty‑500 (Mar 2026)	At an all‑time low, per brokerage data.
2025 FII IT flows	Net selling of ₹74,698 crore	Foreign investors cut exposure to Indian IT.

• Brokerages highlighted AI deflation risk, with cheaper, faster software development pressuring traditional services pricing.
• Some analysts argued that in a low single‑digit growth environment, mid‑to‑high‑teens P/E leaves little margin for error.
• One portfolio manager described the recent bounce as a “dead cat” move, not a durable reversal, citing weak discretionary tech spending and better AI‑linked opportunities in Korea, Taiwan, Japan and the US.

Counter‑view: brokerages still see structural opportunity

• CLSA noted that recent US SaaS earnings show AI has not yet hurt SaaS demand, with several firms maintaining or raising guidance.
• The brokerage said Indian IT vendors with partnerships across SAP, Snowflake, Salesforce, ServiceNow derive 10–25% of revenue from SaaS‑linked work, which remains healthy.
• CLSA differentiated software layers:

– Systems of Record (SoR): less vulnerable, need deterministic outputs; AI likely to act as an interface.

– Systems of Engagement / Work: more exposed to AI substitution.

• Domestic broker Nuvama reiterated that the sector is “setting up for a comeback, not a collapse”, arguing enterprises will still need system integrators to stitch together plug‑and‑play AI and legacy stacks.
• Kunal Bajaj, research analyst at Choice Institutional Equities, said improving global software sentiment and evidence that enterprise AI adoption is expanding technology spending opportunities rather than disrupting incumbents are supporting the medium‑term case for Indian IT.

• “Indian IT stocks continue to extend gains, supported by improving global software sentiment and growing evidence that enterprise AI adoption is expanding technology spending opportunities rather than disrupting incumbent service providers.” — Kunal Bajaj, Research Analyst, Choice Institutional Equities

Technical outlook on Nifty IT and key stocks

Instrument	Key levels / pattern	Technical takeaway (as cited)
Nifty IT index	Support 28,800–29,300; resistance 30,500–32,100	Multiple analysts see an inverse Head & Shoulders breakout with potential targets 32,000–32,500.
TCS	Resistance ₹2,450–2,460; support ₹2,330–2,400	Break above near‑term resistance needed to confirm stronger recovery.
Infosys / large caps	Trading 2–3% below 40‑day EMAs pre‑selloff	Sustained move above EMAs seen as trigger for meaningful short‑covering.

• Chartists earlier highlighted a bullish hammer on the Nifty IT monthly chart and a breakout from an inverse Head & Shoulders pattern, implying upside towards 32,300–32,500 from around 31,050 before Wednesday’s fall.
• Options data showed large short positions in big IT names, with some fresh longs built during the rally; the latest drop suggests profit‑taking rather than full short squeeze.

Global and stock‑specific cues

• Stronger‑than‑expected quarterly numbers from Salesforce, ServiceNow, Snowflake, Palantir had helped revive confidence in software demand.
• A recent Nvidia‑led AI rally and comments from its CEO that Indian IT firms are well placed for AI implementation had also buoyed sentiment.
• Wipro’s expanded Agentic AI partnership with ServiceNow and Coforge’s acquisition of Encora were cited as examples of Indian firms pivoting into AI‑heavy work.
• At the same time, some brokerages cautioned that AI‑related revenue uplift is yet to fully offset pricing pressure and that investors will look for hard evidence in deal wins and growth, not just commentary.

FAQs

Q: Why did Nifty IT fall nearly 6% after a strong three‑day rally?

• Profit‑booking after a roughly 7% rebound, a broader market selloff, persistent concerns over AI‑driven margin pressure and cautious foreign flows all contributed to Wednesday’s decline.

Q: Are brokerages turning bearish on Indian IT after this crash?

• Views are split: some call the bounce a temporary relief rally in a low‑growth, AI‑deflation environment, while others, including CLSA and Nuvama, argue that resilient earnings, SaaS partnerships and system‑integration demand support a medium‑term recovery.

Q: What levels should traders watch on the Nifty IT index now?

• Technical analysts cited support in the 28,800–29,300 zone and resistance around 30,500, with a broader upside band near 32,000–32,500 if the earlier inverse Head & Shoulders breakout reasserts.

Frequently Asked Questions

Why did Nifty IT fall nearly 6% after a strong three‑day rally?

Profit‑taking after a roughly 7% rebound, a broader market selloff, AI‑related pricing concerns and cautious foreign flows drove the sharp decline.

Are brokerages turning bearish on Indian IT after this crash?

Opinions are divided: some see a temporary relief rally in a low‑growth, AI‑deflation setup, while others like CLSA and Nuvama still expect a medium‑term recovery supported by SaaS demand and system‑integration work.

What are the key technical levels for the Nifty IT index now?

Analysts highlight support around 28,800–29,300 and resistance near 30,500, with a broader upside zone around 32,000–32,500 if the earlier bullish pattern holds.