IT stocks face broad-based selling as Coforge plunges nearly 9%, while hawkish US Federal Reserve expectations raise concerns over technology spending and valuations

Indian IT stocks came under heavy selling pressure on Wednesday, September 9, with the Nifty IT index falling nearly 4 per cent during the session. All constituents of the index traded in the red as investors reacted to concerns surrounding Coforge’s corporate governance developments, cautious brokerage commentary and the possibility of a more aggressive interest-rate stance by the US Federal Reserve.

The Nifty IT index touched an intraday low of 28,779.80, representing a decline of approximately 3.7 per cent from its previous close. The sell-off reflects growing concerns over near-term earnings visibility, discretionary technology spending and the premium valuations of several IT companies.

Coforge Leads the Decline

Coforge emerged as the biggest loser in the IT basket, with its shares declining as much as 8.7 per cent to ₹1,780.70 on the NSE during intraday trading.

The stock was trading around ₹1,850.20 at the time of reporting, down ₹99.80, or 5.12 per cent. Coforge’s 52-week range stands between ₹1,008.10 and ₹2,021.95.

Other major IT stocks also witnessed significant declines:

• Infosys, Tech Mahindra, HCLTech, Persistent Systems and TCS fell in the range of 3–4 per cent.

• Mphasis and OFSS declined between 2–3 per cent.

• The broader IT sector remained under pressure, with no constituent of the Nifty IT index trading in positive territory during the session.

The Nifty IT index has now declined nearly 24 per cent so far this year. Over a one-year period, the index is down approximately 17.72 per cent, while its decline over the past one month stands at around 8.04 per cent.

Coforge Chairman’s Resignation Adds to Investor Concerns

The immediate resignation of Coforge’s Non-Executive Independent Director and Chairperson, OP Bhatt, added to the selling pressure.

According to the company’s exchange filing, the board noted Bhatt’s resignation with immediate effect amid concerns raised by an internal audit regarding the Board’s Evaluation Exercise. The company subsequently designated Vivek Sharma, a Non-Executive Independent Director, as interim chairperson until January 31, 2027.

The development has raised concerns among investors about corporate governance, board oversight and the potential impact on market confidence. Although the resignation does not directly indicate an operational weakness, investors often react cautiously when senior leadership changes occur alongside internal audit-related concerns.

Brokerage Commentary Raises Questions Over IT Spending

Another factor weighing on IT stocks was bearish commentary from Antique Stock Broking.

The brokerage observed that the current technology capital expenditure cycle is largely focused on capacity-building, including GPUs, data centres and cloud networks. These investments are being made by hyperscalers and may take several quarters to translate into application development, integration and artificial intelligence adoption projects.

Indian IT companies generate a significant portion of their revenue from these downstream services. Therefore, a delay between infrastructure spending and enterprise technology implementation could affect the pace of revenue conversion in the near term.

Antique also noted that hyperscalers may continue to demand lower pricing from Indian IT service providers while they remain focused on expanding infrastructure capacity. This could create pressure on billing rates and operating margins.

AI Spending Creates Long-Term Opportunity but Near-Term Pressure

The rapid expansion of artificial intelligence infrastructure remains a major long-term opportunity for the technology sector. However, the benefits may not be distributed evenly across the IT value chain.

Hyperscalers are currently spending heavily on computing capacity, data centres and cloud infrastructure. Indian IT companies are expected to benefit when enterprises begin migrating workloads, integrating AI applications and deploying these technologies at scale.

However, the conversion of infrastructure spending into traditional IT services revenue may take time. Until enterprise adoption accelerates, IT companies could face pricing pressure and slower growth in discretionary projects.

This has created a mismatch between strong long-term technology demand and weaker near-term revenue visibility for some Indian IT service providers.

US Federal Reserve Rate Hike Fears Weigh on IT Stocks

Expectations surrounding the upcoming US Federal Reserve meeting have also contributed to the weakness in Indian IT stocks.

According to the CME FedWatch tool, the probability of a US rate hike has increased to approximately 58 per cent from 47 per cent a month earlier. A more aggressive monetary policy stance could raise borrowing costs and encourage companies in North America to delay discretionary technology expenditure.

North America remains a key market for Indian IT companies. Any slowdown in spending on consulting, digital transformation, cloud migration and other non-essential projects could affect order inflows and revenue growth.

Higher interest rates can also place pressure on technology valuations, particularly companies whose future earnings are expected to grow over several years.

Hawkish Signals from the US Fed Add to Uncertainty

Market participants have been reassessing the Federal Reserve’s policy outlook following comments on inflation during the Jackson Hole meeting.

Remarks by Fed Chair Kevin Warsh were interpreted by markets as hawkish, particularly amid concerns that inflation remains above the central bank’s comfort level. If inflation proves persistent, the Fed may delay rate cuts or consider maintaining a restrictive policy for longer.

For Indian IT companies, the implications could include:

• Slower discretionary technology spending in the US.

• Delayed enterprise digital-transformation projects.

• Pressure on client budgets and pricing.

• Higher discount rates for technology valuations.

• Increased volatility in IT stocks.

IT Sector Faces Multiple Challenges

The current weakness in the Nifty IT index is not linked to a single factor. The sector is facing a combination of macroeconomic and company-specific concerns.

Key factors behind the sell-off

• Rising expectations of a US Federal Reserve rate hike.

• Concerns over North American discretionary IT spending.

• Delayed monetisation of AI and cloud infrastructure investments.

• Pricing pressure from global hyperscalers.

• Corporate governance concerns at Coforge.

• Weak investor sentiment toward technology stocks.

• Profit booking following prolonged underperformance.

• Uncertainty over near-term earnings growth.

Despite these challenges, the long-term demand outlook for cloud computing, cybersecurity, artificial intelligence, data analytics and digital transformation remains positive.

What Investors Should Watch

Investors will closely monitor the US Federal Reserve’s policy signals, inflation data and commentary from technology companies regarding client spending.

For Indian IT companies, the key indicators will include:

• Deal wins and order-book growth.

• Revenue growth in North America.

• Client technology budgets.

• Pricing and margin trends.

• Attrition and hiring levels.

• AI-related revenue contribution.

• Cloud migration demand.

• Management commentary on discretionary spending.

• Corporate governance developments.

The performance of the rupee against the US dollar will also remain important, as a weaker rupee can provide some support to the earnings of export-oriented IT companies. However, currency benefits may not fully offset weaker demand or pricing pressure.

Market Outlook

The Nifty IT index may remain volatile in the near term as investors assess US interest-rate expectations, technology spending trends and company-specific developments.

Coforge’s leadership change has added an additional layer of uncertainty, while concerns over delayed monetisation of AI infrastructure spending could keep pressure on the broader IT sector.

Long-term opportunities remain intact, particularly in artificial intelligence, cloud computing, cybersecurity and enterprise digital transformation. However, investors should focus on companies with strong balance sheets, diversified client bases, healthy order books and consistent cash generation.

Until there is greater clarity on US monetary policy and discretionary technology spending, IT stocks may continue to witness sharp movements and selective buying rather than a broad-based recovery.