NIFTY IT Plunged 21%, Biggest Fall Since 2008 Global Financial Crisis - What Next?

The Nifty IT index has plunged over 21% in February alone after Tuesday’s 6% slide, marking its worst monthly fall since the 2008 global financial crisis.

The trigger this time extends beyond macro weakness. Fresh concerns around artificial intelligence (AI)-led disruption have shaken investor confidence.

Fears intensified after AI startup Anthropic said its Claude tool can help streamline COBOL code, which is a language that underpins many legacy systems and long-standing information technology (IT) service contracts.

The development raised concerns about potential pressure on traditional revenue streams for technology companies.

Global tech stocks reacted sharply. IBM's share price plunged 13% overnight, marking its steepest single-day decline in nearly 25 years and adding to sector-wide anxiety.

How Deep Is The Selloff?

In the latest session, IT stocks fell as much as 8%. The companies, like:

• Coforge, Persistent Systems and HCL Tech share prices fell by 7–8%.

• Infosys, Tech Mahindra, Mphasis, and TCS share prices declined by 4–6%.

• The Nifty IT index tumbled 6% in a single day.

After the correction, the Nifty IT index is now trading at an eight-year low relative to the Nifty 500, attracting the attention of contrarian investors seeking value.

What Do Technical Indicators Suggest?

Technical indicators suggest the Nifty IT index remains under pressure despite brief signs of oversoldness.

Anand James of Geojit Investments said the index has broken below key support levels, with momentum indicators pointing to further downside.

Immediate support levels are seen around 29,961, followed by 28,800 and 27,200 in case of deeper weakness. Resistance levels are placed at 30,300 (intraday) and 31,300 (closing basis).

Sachin Gupta of Choice Broking said the breakdown from a head and shoulders pattern confirms a structural trend reversal. The fall below key Fibonacci retracement levels and the emergence of a “Death Cross” signal a shift from buy-on-dips to sell-on-rise.

He believes the index could drift towards the 29,300–28,700 band unless global cues, especially from the Nasdaq, improve meaningfully.

Ajit Mishra of Religare Broking noted a pattern of lower highs and lower lows, with immediate support near 29,600 and major support around 26,300. Any bounce towards the 33,000–34,000 region may invite renewed selling pressure.

What Does This Mean For Investors?

The Nifty IT index may not have reached the final stage of the corrective phase, and downside risks may not have been exhausted. Multiple analysts point to weakening momentum, structural breakdown patterns and resistance levels that may cap near-term recoveries.

In the case of short-term traders, the trend is generally skewed towards selling rallies and not buying dips unless there is a stabilisation in the global tech sentiment, especially in the US.

For long-term investors, the valuations might be more rational following the steep correction, but the price action does not yet indicate a verified bottom. Stabilisation in global markets, clarity on AI-driven earnings impact and a break above key resistance levels could be stronger indicators of a durable recovery.

A stumbling or selective strategy is probably wiser than positioning aggressively up to that point, and close consideration of global technology indicators and industry revenue transparency is desired.

Sources:

Economic Times
Business Standard
Business Line