Nifty IT hits three-year low as KPIT warning deepens selloff

The Nifty IT index fell about 2% on Wednesday and is down 31% in the first half of 2026, after KPIT Technologies warned of weak revenue in the first two quarters of FY27, triggering a 17% single-day drop and intensifying concerns over slowing growth and AI-led disruption.

Investor focus has shifted to whether subdued demand and AI-driven productivity gains will keep Indian IT growth in low single digits, even as valuations, though sharply lower, still trade at a premium to global peers.

Market Overview

Index	2 Jul 2026 Close (approx.)	Move & % Change	Comments
Nifty IT	approx. three-year low	-2% (session)	Biggest sectoral loser, dragged by KPIT-led mid-cap selloff.
Nifty 50	24,005.85	+140 pts (+0.6%)	Broad market gained despite IT weakness.

Note: figures are approximate; final exchange data not available at time of publication.

• Nifty IT has declined 31% between January and June 2026.
• This is its worst first-half performance since 2001, when it fell 44%.
• The index is down 32% in 2026, per year-to-date data.
• Nifty IT is now at a three-year low, according to index data.

Key Movers

Top Gainers	Sector	Notable Factor
Oracle Financial Services Software	IT	Only Nifty IT constituent with gains, up over 41% in 2026.

Top Losers	Sector	Notable Factor
KPIT Technologies	IT	Warned of near-term revenue slowdown; stock fell 17% on Wednesday.
LTM	IT	Large-cap name down 42% in 2026.
Infosys	IT	Share price down 36-40% this year.
TCS	IT	Share price down 36-40% this year.
HCL Technologies	IT	Share price down 36-40% this year.
Wipro	IT	Share price down 36-40% this year.
Tech Mahindra	IT	Stock has dropped 15.4% in 2026.
Persistent Systems	IT	Mid-cap IT name down 17-31% this year.
Mphasis	IT	Mid-cap IT name down 17-31% this year.
Coforge	IT	Mid-cap IT name down 17-31%; fell 3-6% on Wednesday.
Tata Elxsi	IT	Engineering R&D firm; fell 3-6% on Wednesday.

• KPIT Technologies shares are down nearly 52% so far in 2026.
• Coforge, Tata Elxsi and L&T Tech fell 3-6% in Wednesday trade.
• The selloff has been broad-based across large-cap and mid-cap IT stocks.

• “The sharp fall in KPIT appears to be an overreaction, as the slowdown or terminations in deals across the IT sector have been known to the market for some time.” — Apurva Sheth, Head of Research, Samco Securities.

Sectoral Action

Sector/Index	Direction (approx.)	Key Drivers
Nifty IT	down 2%	KPIT outlook shock, persistent growth worries, AI-led productivity concerns.
Nifty 50	up 0.6%	Gains in non-IT sectors offset technology weakness.

Note: figures are approximate; final exchange data not available at time of publication.

• Investor sentiment on IT is weak on fears AI may delay tech spending.
• Concerns include AI-driven productivity gains impacting outsourcing volumes.
• Engineering R&D firms saw earlier benefit from outsourcing shifts into India.
• Those Europe-related disruptions are now largely behind, impacting order inflows.

• “With those disruptions largely behind us, order inflows are likely to normalise, a trend reflected in KPIT’s recent commentary.” — Devarsh Vakil, Head of Prime Research, HDFC Securities.

Valuation Picture

Statistic	Value/Change	Context
Indian IT FY28E P/E	approx. 13x	Below 10-year average 15-20x, but still premium to global peers.
Indian IT 12M forward P/E	14x	At 25% discount to 10-year and 35% discount to 5-year average.
Global peers 12M forward P/E	8x	Accenture, Cognizant, Capgemini average; Indian IT at 90% premium.

• Despite a 35-40% fall, Indian IT is still considered expensive by analysts.
• Historical Indian IT premium to global peers was 20-30%, now about 90%.
• Large-cap IT previously bottomed at 11-13x P/E multiples in past cycles.

• “We believe a sustained re-rating will require evidence that demand is improving, revenue growth is stabilising, and companies can demonstrate that AI-led opportunities are beginning to offset productivity-related headwinds.” — Motilal Oswal Financial Services IT earnings preview.

Growth Outlook and Earnings Cuts

Statistic	Value/Change	Context
Nifty IT growth trend	FY27 likely 4th weak year	Signals prolonged period of subdued revenue expansion.
Goldman Sachs aggregate organic growth	cut to 2.4%	Down from 3.2%, reflects slower demand expectations.
Infosys FY27 revenue growth	approx. 3%	Includes 2% from acquisitions, implying 1% organic growth.
Infosys FY26 organic growth	2.4%	Current-year organic growth seen below prior year.
TCS growth estimate cut	250 bps	Morgan Stanley reduced forecasts sharply.
Infosys growth estimate cut	150 bps	Morgan Stanley trimmed projections.

• FY27 is expected to be the fourth consecutive year of subdued IT growth.
• Analysts see low single-digit organic growth across large-cap IT names.
• KPIT warned Q1 FY27 dollar revenue will decline 1% year-on-year.
• KPIT expects Q2 FY27 revenue trends to be similar to Q1.
• Infosys may lower the upper end of its 1.5-3.5% FY27 organic revenue guidance.

KPIT-specific Commentary and Technicals

Statistic	Value/Change	Context
KPIT Q1 FY27 USD revenue	-1% YoY	Company guidance indicates near-term revenue decline.
KPIT share performance 2026	-52%	Reflects impact of outlook warnings and sector derating.
JM Financial rating	downgraded to Reduce	Price target cut to ₹620 from Buy stance.
Key resistance zone	₹650-700	Any rebound may face resistance near this band.

• KPIT cited actions by some European OEMs after profit warnings and weak outlooks.
• These actions are expected to keep Q1 and Q2 FY27 performance weak.
• Engineering R&D companies are expected to face continued near-term pressure.

• “We saw that over the past few years, engineering R&D firms like KPIT and Tata Elxsi benefited from a surge in outsourcing as global clients shifted work from other geographies to India amid uncertainty in Europe.” — Devarsh Vakil, HDFC Securities.

• “Vakil said he expects continued near-term pressure on engineering R&D companies.” — Devarsh Vakil, HDFC Securities.

• “The stock has broken below all major moving averages, leaving it near a 52-week support zone, while any rebound may face resistance in the ₹650-700 range.” — Nishchal Jain, Quant Researcher, Share.Market.

Technical Outlook for Nifty IT

Statistic	Value/Change	Context
Nifty IT level	approx. three-year low	Reflects extended downtrend and sector derating.

• Analysts warn the derating story for large-cap IT is not over yet.
• Previous bottoms at 11-13x P/E suggest scope for further downside.
• Headcount trends are expected to stay muted across major IT firms.

Key Triggers Ahead

• Discretionary spending trends, especially in BFSI, versus softness in telecom and manufacturing.
• Extent of AI-led deflation versus 2-4% already priced in by investors.
• Evidence that AI-led revenue streams offset erosion in traditional businesses.
• AI investment intensity and capability building across large IT vendors.
• Cost efficiency programmes: Project Maximus (Infosys), Project Fortius (Tech Mahindra), Project Ascent (HCLTech).

Global Context

Market/Asset	Movement	Notes
Global IT peers (Accenture, Cognizant, Capgemini)	valued at 8x 12M forward P/E	Highlights valuation gap versus Indian IT at 14x.

• Indian IT trades at a significant premium despite slower growth than global peers.

FAQs

Q: Why has the Nifty IT index fallen so sharply in 2026?

• Weak revenue growth, AI-driven productivity concerns, and cautious client spending have pushed Nifty IT down 31% in H1 and 32% year-to-date.

Q: How did KPIT Technologies trigger the latest selloff?

• KPIT warned Q1 and Q2 FY27 revenues would be weak due to actions by European OEMs, leading to a 17% single-day fall and broader mid-cap IT declines.

Q: Are Indian IT valuations now attractive compared with global peers?

• Despite derating to about 13x FY28 earnings, Indian IT still trades at a 90% premium to global peers valued at 8x, limiting the valuation appeal.

Frequently Asked Questions

Why has the Nifty IT index fallen so sharply in 2026?

Weak revenue growth, AI-driven productivity concerns, and cautious client spending have pushed Nifty IT down 31% in H1 and 32% year-to-date.

How did KPIT Technologies trigger the latest selloff?

KPIT warned Q1 and Q2 FY27 revenues would be weak due to actions by European OEMs, leading to a 17% single-day fall and broader mid-cap IT declines.

Are Indian IT valuations now attractive compared with global peers?

Despite derating to about 13x FY28 earnings, Indian IT still trades at a 90% premium to global peers valued at 8x, limiting the valuation appeal.