Global Tech Rout Triggers Sharp Decline in Indian IT Stocks
Intense selling pressure in global technology equities cascaded into Indian IT counters listed in the United States on Thursday, with American Depositary Receipts (ADRs) of Infosys and Wipro plummeting dramatically. This downturn unfolded against a backdrop of widespread risk aversion, fueled by mounting anxieties over the interest rate trajectory and profound artificial intelligence-driven disruptions reshaping the sector.
Steep Falls for Infosys and Wipro ADRs
Infosys ADRs experienced a severe drop of more than 7 percent, hitting an intraday low of $14.59. Concurrently, Wipro's ADRs declined by 5.4 percent to $2.26 during early trading sessions. This weakness mirrored prior losses in domestic Indian IT stocks and paralleled significant declines across major U.S. technology names, as detailed in a recent financial report.
Broader U.S. Market Under Pressure
The sell-off was not isolated to Indian firms. The broader U.S. equity market faced substantial pressure, with the technology-heavy Nasdaq Composite index sliding over 300 points, representing a decline of more than 1 percent. At approximately 11:11 AM Eastern Time (9:43 PM Indian Standard Time), the Nasdaq stood at 22,764.90. Similarly, the S&P 500 index fell by 0.6 percent to 6,902.80, while the Dow Jones Industrial Average dropped 249.27 points, or 0.50 percent, settling at 49,872.10.
Among individual stocks, Cisco witnessed an 11 percent plunge, and other large-cap technology giants including Apple, Nvidia, and IBM were down by as much as 6 percent during the trading session.
Domestic Indian Market Already Reeling
Earlier in the day, Indian benchmark indices had already closed sharply lower, dragged down by heavy selling in IT stocks. The Nifty IT index concluded 5.5 percent lower, with all ten of its constituent stocks finishing in negative territory. This sell-off erased approximately Rs 1.3 lakh crore in market capitalization across listed IT companies in India.
The sharp decline was triggered by persistent concerns over AI-led disruption in the traditional outsourcing business model, compounded by stronger-than-expected U.S. jobs data that diminished hopes for near-term interest rate cuts by the U.S. Federal Reserve.
Nifty IT: The Worst-Performing Sectoral Index
The Nifty IT index has now solidified its position as the worst-performing sectoral index, having declined about 21 percent over the past twelve months. This underperformance highlights the sector's ongoing challenges and investor apprehensions.
Expert Insights on the Downturn
Vinod Nair, Head of Research at Geojit Investments, attributed the latest decline in Indian IT stocks primarily to the robust U.S. employment figures and a marginal decrease in the unemployment rate. These factors collectively lowered expectations for early rate cuts by the U.S. Federal Reserve. Nair emphasized that concerns surrounding AI-led disruption continue to weigh heavily on sector sentiment.
Elaborating on AI risks, Nair explained that the technology is structurally transforming Indian IT services by shortening delivery timelines and automating volume-driven work. This shift is exerting pressure on the traditional headcount-based outsourcing model.
"Layoffs are likely in routine-heavy areas as fewer people will be needed to deliver the same outcomes. Even ERP implementation, as highlighted by Palantir’s recent focus, is now vulnerable to AI disruption. Clients are shifting toward outcome-based pricing. In the coming quarters, AI adoption could create headwinds for deal wins, potentially impacting topline, making close monitoring of deal flow essential to assess its real impact," he warned.
