Indian IT stocks experienced widespread profit booking, halting a sharp five-day rally as global investor risk appetite shifted back toward global artificial intelligence and semiconductor firms. The Nifty IT index declined by up to 2.5%, emerging as one of the major drag factors on domestic equity benchmarks, with market heavyweights such as Infosys and Tata Consultancy Services (TCS) sliding as much as 3% in early trade.
The retreat follows a powerful run-up earlier in the week, during which investors rotated heavily into defensive Indian software exporters amid valuations and capital expenditure concerns surrounding global hardware and chipmakers. However, strong quarterly performance and reassuring forward guidance on AI spending from U.S. tech giants like Microsoft and Amazon over the week reignited optimism in global AI hardware, prompting capital flows to shift back into global tech leaders.
Despite the single-day pullback, the Nifty IT index remains up roughly 15% to 16% for the month of July, positioning the sector for its strongest monthly performance in six years. Analysts attribute the decline primarily to short-term tactical profit-taking rather than structural weakness, noting that Indian IT service providers remain attractive due to their lower capital intensity and stable earnings profile amidst continuing market volatility.