Indian information technology (IT) stocks came under pressure on Monday as traders increased bearish positions ahead of the impending third-quarter earnings season and amid recent broker downgrades, driving the sector lower on the market.
The NSE IT index fell about 1.4 %, with nine out of ten stocks declining in value, weighed down by short-build-up activity in major names such as TCS, Infosys, Wipro, HCL Technologies, and Tech Mahindra. Only LTI Mindtree managed a slight uptick on the day.
Analysts say caution is being driven by seasonal softness typical of the third quarter, slow deal conversions, and increased furloughs, which historically reduce utilisation and impact earnings. Coupled with downgrades on some large caps and geopolitical concerns that could affect global IT spending, traders are choosing to hedge or bet on further near-term weakness.
The uptick in bearish derivative positions — essentially traders increasing short exposure — reflects heightened risk aversion as the market awaits corporate earnings. Some brokerages now recommend reduced exposure in the IT sector in the short term, especially given uncertainty around revenue visibility and client budgeting trends.
Despite recent weakness, the IT index has shown some recovery over the past few months as investors seek value after underperformance; however, the near-term outlook remains cautious until earnings clarity improves.
Bottom line: IT stocks are under pressure from bearish positioning and cautious sentiment as traders prepare for quarterly results and digest recent downgrades, even as broader market dynamics continue to evolve.
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