Nifty IT index enters bear market, dropping over 21%

The Nifty IT index has entered a bear market, dropping over 21% since its peak in December 2024, affected by fears of a US recession and cautious spending by clients. In 2025 alone, the index is down 16%, with major companies facing notable declines. This decline, which includes a 2.3% drop this month, reflects worries about growth in the IT sector. The downturn stems from decreased demand in North America, which is a key market for Indian IT firms. Analysts point to factors such as fears of a US recession and increased competition from artificial intelligence as significant concerns. Overall, all major companies within the Nifty IT index have seen their stocks fall this year. Coforge has been the worst performer, falling 22%. Other companies like LTIMindtree and Persistent Systems have also seen steep losses. Heavyweights such as Infosys and Tata Consultancy Services have lost between 13% and 16%. Brokerages have downgraded several IT companies based on valuation concerns and a cautious outlook for spending on IT services. For instance, Infosys was downgraded to "neutral," and Wipro to "sell." Analysts say clients are taking a "wait-and-watch" approach and are being more conservative with their budgets. In terms of technical analysis, some experts believe the Nifty IT index is undergoing a short-term correction. It is currently below significant moving averages, indicating ongoing weakness. However, there is critical support at 36,800. If this level is broken, further declines could occur. Some analysts note a possible short-term bounce might happen, as indicated by recent technical patterns. Support is expected around 36,200. A gradual recovery could follow, but any rise is likely to be slow, without sharp rebounds expected. In summary, while the Nifty IT index faces significant challenges from weak demand and macroeconomic concerns, analysts suggest there may be potential for a short-term recovery, though the overall outlook remains uncertain.