Shares of Indian IT companies, including TCS, Infosys and Wipro, fell sharply on Wednesday as a sell-off in global technology stocks weighed on investor sentiment, triggering fresh selling pressure in the domestic IT sector.
Analysts said the recent rotation of investments away from global AI and semiconductor stocks towards traditional IT services companies was largely a tactical move and did not indicate any fundamental improvement in the sector's earnings outlook.
Ajit Mishra, Senior Vice President, Research, Religare Broking, said the decline was driven by profit booking as investors remained cautious about a sustained recovery in earnings.
"Weakness in global AI stocks is not automatically beneficial for Indian IT services, as it also raises questions about the sustainability of AI-led investments, particularly data-centre spending, and the potential implications of evolving regulatory and policy developments in the US," he said.
Markets also remained cautious amid concerns that a Democratic victory in the US midterm elections could lead to tighter regulatory scrutiny of AI companies and affect technology spending in Asia.