Nifty IT tumbles 3%: Near-term trend weak; AI concerns, US rate worries weigh

Sub-index Nifty IT fell more than 3 per cent on Wednesday, emerging as the biggest sectoral laggard amid selling pressure across major IT stocks. From a technical perspective, the near-term trend remains under pressure, according to Hitesh Tailor, Technical Research Analyst at Choice Broking.

"After witnessing a strong recovery from the 26,250 support zone, the index recently faced rejection from the 31,900–32,000 zone, which is aligned with the 200-Day EMA and a multi-month horizontal resistance level. This rejection has resulted in a fresh retracement, keeping the near-term trend under pressure," Tailor said.

He said the index has immediate support around 28,700, while the 28,000–28,150 zone remains a crucial support area. This zone is aligned with the recent swing low from where the previous recovery began.

"Sustaining above this zone could help CNXIT stabilise and continue its consolidation," Tailor said.

On the upside, the 31,500–32,000 zone remains a major hurdle. A decisive breakout and sustained move above this resistance area would indicate renewed upside momentum, he added.

"Until then, sideways consolidation with intermittent volatility is likely," Tailor said.

On individual stocks, Tailor said Wipro, Infosys and TCS have witnessed notable profit booking and selling pressure in recent weeks. He added that the latest fall in IT stocks was marked by gap-down openings followed by further selling pressure during the session.

"Most of the major IT stocks are currently facing rejections from their key EMAs and maintaining a lower-high and lower-low formation, indicating continued weakness in the near-term trend," he said.

AI concerns, US interest rate outlook

Ponmudi R, CEO of Enrich Money, said the IT sector fell sharply as investors reassessed the long-term implications of rapid advances in artificial intelligence (AI) for the software industry.

"OpenAI's launch of GPT-6 Astra reignited concerns that increasingly capable AI models could encroach on functions traditionally performed by specialised software companies, prompting renewed selling across technology stocks," Ponmudi said.

The sector also remained under pressure as investors grew increasingly concerned that US interest rates could stay higher for longer ahead of key US inflation data due later this week, he added.

"A prolonged period of tighter financial conditions is expected to weigh on discretionary technology spending by US-based companies, a key demand driver for Indian IT exporters," Ponmudi said.

According to him, the combination of AI-led disruption concerns and a more challenging macroeconomic backdrop added to worries over the sector's medium-term growth outlook.