Breaking Update: Here’s a clear explanation of the latest developments related to Breaking News:TCS, Infosys to Wipro: Should you buy the dip after AI-driven sell-off?– What Just Happened and why it matters right now.
Stock market crash: Following sell-off pressure in Nasdaq-listed stocks such as NVIDIA, Apple, Alphabet, Meta, and Microsoft, the Indian IT stocks remained under the bears’ grip on the weekend sessions. In the last three straight sessions, the TCS share price nosedived from ₹2,984.60 per share to ₹2,695 on the NSE, logging a near 10% dip in just three days. In this crash, the TCS market cap slipped below SBI’s.
In this AI-disrupted sell-off, Infosys shares crashed from ₹1,497.80 per share to ₹1,369 apiece on the NSE, logging over 8.50% dip in three straight sessions. Likewise, Wipro share price corrected from ₹231.47 to ₹214.38 apiece on the NSE, logging a loss of around 7.50% in the last three straight sessions.
Birlasoft, Firstsource Solutions Ltd (FSL), Cyient, Coforge, Happiest Minds, HCL Technologies, and other Indian IT majors also witnessed heavy sell-off over the last three sessions of last week.
According to stock market experts, much will depend on the kind of recovery in Nasdaq-listed US tech stocks. If they manage to pare their recent losses rather than see a dead-cat bounce, we can expect a sharp recovery in Indian IT stocks. However, a recovery that falls short of the losses incurred in recent sessions would mean more pain for IT stocks in both the US and Indian markets. However, there is a blessing in disguise for Indian IT stocks: they didn’t participate in the AI-fueled rally last year, whereas Nasdaq-listed stocks delivered whopping returns. So, the chances of a correction in Indian IT stocks are limited despite further selling in US IT and tech stocks.
Nasdaq-listed stocks hold key
Amit Goel, Chief Global Strategist at PACE 360, believes that Indian investors should remain vigilant about the Nasdaq index performance. He said the tech-heavy index of the US stock market must recover in the first few sessions of next week. He stressed that the rebound should be strong, not a dead-cat bounce, in which bull-market gains are less than the losses incurred during the bear market.
If the Nasdaq index fails to recover its losses from last week, Amit Goel said, “Further correction in the Nasdaq and other US stock indices is expected to renew the fear of a slowdown in the US economy, which may further intensify the selling pressure on Wall Street. When Wall Street is under the bears’ grip, how can other global bourses, including India’s Nifty 50, Sensex, and Bank Nifty indices, expect to remain insulated from the US stock market crash?
The Chief Global Strategist at PACE 360 said that, traditionally, India has been relatively unaffected by the global financial crisis. Even during the 2008 subprime mortgage crisis, the Indian economy was less affected than those of developed economies. However, during the upcoming economic slowdown, Indian IT companies are expected to be heavily affected, as their balance sheets have remained under pressure for the past four years. So, their cash reserves and order books are comparatively weak. So, we may see layoffs at Indian IT companies if the US fails to contain the renewed fear of an economic slowdown.
A ray of hope for Indian IT stocks
Pointing to the hope for Indian IT stocks despite strong selling in US IT and tech majors, Dr VK Vijayakumar, Chief Investment Strategist at Geojit Investments, said that the sell-off in AI stocks in US markets was expected, but its timing and extent were unknown. The 5.50% decline in the Nasdaq from its closing high last month is not a crash. But if the downtrend continues, it might pull the US market down.
“For the Indian market, this correction in AI stocks is a positive because last year’s global rally was primarily an AI trade in which India, an AI laggard, couldn’t participate. So the unwinding of the AI trade, if it persists, is a positive from the Indian perspective. However, what is rattling the Indian market now is the massive sell-off in IT stocks, which is the second-largest profit pool of India Inc,” Dr VK Vijayakumar added.
Advising investors to initiate accumulation in the top Indian IT majors, Mahesh M Ojha, VP — Research at KC Securities, said, “Top five Indian IT stocks — TCS, Wipro, Infosys, HCL Technologies, and Tech Mahindra — are trading at attractive valuations. These IT stocks are currently trading at around 5% dividend yield, which is quite attractive. Their risk-reward ratio suggests returns up to 30%.”
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.