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Informist, Friday, Feb. 21, 2025

MUMBAI – Information technology stocks are expected to fall more next week on expectations of negative surprises from the Donald Trump administration on economic policy, which will have direct or indirect impact on Indian IT companies, some analysts tracking the sector said. So far in 2025, the Nifty IT has fallen over 6%, which is nearly twice the pace of the fall in the benchmark Nifty 50 index.

Technically, the Nifty IT index is placed on a weaker side and there is more downside left, Nandish Shah, senior derivative and technical analyst at HDFC Securities, said. He sees 41300 points as a crucial resistance level for the index. "...unless it crosses that level, one should have a cautious view," Shah said.

This week, IT stocks saw selling pressure and the IT index fell nearly 2% to close at 40544.55 points. Of the 10 constituents of the index, seven fell over the week while L&T Technology Services, Persistent Systems, and Mphasis rose. Shares of Coforge and Tata Consultancy Services were the worst-hit this week, falling 3.8% each.

The Nifty IT index is expected to find support at 40300-40200 points for the next two weeks as long as the negative sentiment around a global trade war persists, Jigar Patel, senior manager of equity research at Anand Rathi Shares & Stock Brokers, had told Informist Wednesday. Over the past six months, the index has fallen over 5%, while the benchmark Nifty 50 and Sensex have fallen nearly 10% and 8.6%, respectively. The Nifty Metal index has fallen more than 8% and the Nifty Auto index has fallen around 18% over the same period. Compared to these other sectors, the fall in IT stocks was not bad, Sumit Pokharna, vice-president of Kotak Securities, said. "In the last six months it (the Nifty IT) has mostly outperformed metals, auto, mid-caps, small-caps, and the benchmark indexes," he said. This was primarily due to improved revenue visibility for IT companies, as most of them had a positive view on the revival of discretionary spending and the continued depreciation of the rupee against the dollar, he said.

The outlook on IT spending in 2025 will be a major trigger for these stocks, a research associate at a domestic brokerage said. "...we should get clarity (on 2025 IT spending) in about one or two months," the research associate added.

The recent fall in IT stocks this week was due to the likely selling pressure from foreign institutional investors after President Trump threatened to impose more tariffs on key trading partners of the US, analysts had told Informist earlier this week. On Tuesday, Trump said he intends to impose 25% or higher tariffs on semiconductor, automobile, and pharmaceutical imports as part of his "America first" trade policy. Analysts had said FIIs are seen moving their money to the Chinese market as startup company DeepSeek begins to gain prominence.

However, DeepSeek's cost-effective generative artificial intelligence mode 'R1' is expected to also have a positive impact on Indian IT service providers as it would led to increased adoption of AI services by companies and clients, Pokharna said. This is a new opportunity for Indian IT players as they invest more for such models and launch multiple platforms, he added. 

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Following are the resistance and support levels for the stocks for next week as per calculations based on their prices on the National Stock Exchange:

End

Reported by Arya S. Biju

Edited by Rajeev Pai

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