Indian IT stocks tumbled by over 6% on June 19 as a sharp decline in revenue growth outlook by global consulting and technology company Accenture and a weaker-than-expected forecast weighed on shares in the sector. The sell-off in the sector led to the loss of almost Rs 1.35 lakh crore in market value of all IT companies and marked one of India's worst sell-off days for IT shares in the last few months.
Key Highlights
- Indian IT stocks plunged over 6%, erasing Rs 1.35 lakh crore market value.
- Accenture's weaker revenue outlook triggered broad selling across major IT companies.
The swift turnaround occurred as investors responded to rising worries about tepid global technology investments, conservative client spending, geopolitical risks, and emerging AI-driven change. Investors monitor Accenture's comments as it is considered to be a bellwether for the IT services sector.
Nifty IT Tumbles 6.5%; Infosys Leads the Decline
The Nifty IT index declined by 6.5%, with its performance much lower than the overall market index. Major IT stocks were all in the red as selling was widespread in the large-cap and mid-cap tech group.
Infosys was leading with a loss of 7.5%, followed by Mphasis, Tech Mahindra, Persistent Systems and Tata Consultancy Services (TCS) which recorded a loss of over 6% each. The other companies include HCLTech, Coforge and LTIMindtree, which tumbled over 5%, and Wipro and L&T Technology Services, which were also down sharply.
This negative sentiment was carried over to the international markets, too. Infosys's and Wipro's stocks dropped up to 10% in U.S. trading, with Cognizant, IBM and Capgemini stocks also taking a hit after Accenture's announcement.
What Triggered the IT Sector Meltdown?
Accenture has raised its constant currency revenue outlook to the high end of its range, from 3%-5% to 3%-4%, in FY26. The company further forecast lower than expected revenue for the fourth quarter and lower than expected bookings growth.
Continued sluggish client spending, consulting demand pressures and disruption caused by geopolitical tensions, especially in the Middle East, were cited as reasons for the decline in the company's performance. The war also impacted business activity and bookings in the region, Accenture said.
The guidance revision was seen as a warning bell for the wider IT services market, still reliant on discretionary enterprise technology investment.
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AI Concerns add to Investor Concerns
Besides the slower spending trends, investors are now taking into account the effect of artificial intelligence on conventional IT outsourcing models. AI-powered automation may impact traditional IT service demand, raising questions about future growth prospects for IT service providers, according to analysts.
Accenture's focus was on acquiring new technologies, such as AI, cybersecurity and cloud, to bolster investments, but the market was more interested in the immediate growth opportunities and momentum of the deal.
Outlook for Indian IT Stocks
The industry could be a drag on growth for the foreseeable future, as investors rethink year-on-year earnings growth and growth visibility, according to brokerages. A couple of analysts said further earnings downgrades may result in further valuation correction across Indian IT companies.
Experts, however, say that the long term prospects in artificial intelligence, cloud modernization, cybersecurity and digital transformation are untouched. Now it will be looking at the next set of quarterly earnings and management commentary from the key IT companies in India which may offer better clarity around demand revival and growth outlooks.
