A fall in information technology (IT) stocks, led by Infosys, was the main reason the Nifty was dragged down to its lowest close in nearly two months on Monday, amid tensions that pushed crude oil prices to $97 per barrel and ahead of two large initial public offerings (IPOs) that could suck money out of the secondary markets. The IT index was hit the hardest as the sector is sensitive to geopolitical tensions. Amid US-Iran tensions and concerns over shipping through the Strait of Hormuz, investors are giving the IT sector a miss. The sector currently accounts for 8.5 per cent of the Nifty 50 index.

  

The Nifty ended at 23,779.15, down 118.55 points, or 0.5 per cent, marking its first close below 23,800 since mid-July. The Sensex fell 382.62 points, or 0.5 per cent, to 76,132.81. The Nifty is now 3.2 per cent lower than it was on August 7 and 9.8 per cent below its 52-week high of 26,373.2.

 

The Nifty IT index took the brunt of the selloff, closing 2.28 per cent lower at 29,995.2, while Infosys fell 3.76 per cent to ₹1,087.5, wiping out about ₹17,243 crore of market value in a single day. Infosys accounts for 27 per cent of the index.

 

Tech Mahindra (TechM), Mphasis, and Wipro were down around 2 per cent each, while Tata Consultancy Services (TCS) fell 1.5 per cent. The Nifty IT index has fallen 4.9 per cent in a month and 13.4 per cent year-on-year (Y-o-Y), making it the weakest major sector on a 12-month basis after fast-moving consumer goods, which is down 19 per cent over the same period.

 

The Indian IT index is going through a rough patch, with the sector becoming a value bet for some investors, although they remain cautious buyers. Focused funds that invest in select sectors or themes have stopped betting on IT altogether.

 

“We believe four themes have emerged from the recent chain of events: high pricing pressure as deals remain insufficient to support growth aspirations for all; concerns related to the terminal value of IT services have reduced; the debate between open-source and closed models continues; and challengers will continue to gain wallet share. Our preferred picks are TechM, Coforge, Hexaware Technologies, and Indegene,” said a Kotak Institutional Equities research report dated August 25. The brokerage downgraded Infosys and TCS to ‘add’ from ‘buy’, and LTM to ‘reduce’.

 

Initially, the narrative was that artificial intelligence (AI) would wipe out the Indian IT sector. This later shifted to the view that AI spending was increasing, especially following Nvidia’s results, where second-quarter results for the May-July period showed total revenue rising 106 per cent Y-o-Y to $96.2 billion. Nvidia’s financial year runs ahead of the calendar year (CY), so results reported in August are referred to as Q2 FY2027 results.

 

Models and agents are not plug-and-play in an enterprise, and Indian IT services firms will be required to undertake a range of work for hyperscalers, driven by the creation of forward deployed engineers and frontier model laboratories. While this development was a booster for the sector, the fact remains that the sector is sensitive to geopolitics, with oil prices and interest rates moving hand in hand.

 

Companies such as Cognizant and Capgemini are growing at around 3 per cent in local currency terms (Q2 CY 2026), while TCS, Infosys, and Wipro are growing at around 2.6 per cent, based on their latest reported quarters. The IT sector is growing, but AI will shrink the pool available to Indian businesses, the Kotak report said.

 

The market is worried that the Nifty’s close below 23,800 could open the door to a new trading range below 23,750. Near-term direction remains heavily dependent on crude prices, US yields, Federal Reserve commentary, and the upcoming mega IPOs of Reliance Jio and the National Stock Exchange (NSE), which are also contributing to profit booking in the market.

 

“Apart from the elevated crude prices and geopolitical tensions, the ongoing IPO boom in India has impacted the stock market. The focus is now on the booming primary market. With two mega IPOs — NSE and Jio — expected to hit the market this month, all attention is on the primary market,” said V K Vijayakumar, chief investment strategist at Geojit Investments.