Indian Stocks Close Lower; IT Sector Slumps into Bear Market

Indian benchmark indexes ended lower on Wednesday, weighed down by losses in the information technology (IT) sector, which officially entered bear market territory. Concerns over the health of the U.S. economy and a series of stock downgrades contributed to the negative sentiment.

The Nifty 50 index closed 0.12% lower at 22,470.5, while the Sensex slipped 0.1% to settle at 74,029.76. Market volatility was evident throughout the session, with the indexes swinging between a decline of 0.7% and a gain of 0.4% before ultimately closing in the red.

The downturn in IT stocks reflected growing unease about the global economic outlook, particularly in the United States, which prompted analysts to adjust their ratings on several key stocks. This weighed heavily on investor confidence and contributed to the broader market weakness. Despite brief recoveries during the session, selling pressure in the IT sector and lingering economic uncertainty ultimately pushed the benchmarks into negative territory by the close of trading.

According to analysts, the Indian stock market has shown greater resilience compared to global equities over the past week. This relative strength has been attributed to more balanced and attractive valuations following the significant declines witnessed over the past few months.

The sharp correction in recent months had led to inflated stock prices cooling down, which helped bring valuations to more reasonable levels. This moderation in valuations has provided a cushion against broader global market weakness, allowing Indian equities to perform comparatively better. Analysts noted that while global markets have faced increased volatility and economic uncertainty, the Indian market’s adjustment in valuations has helped stabilize investor sentiment and limit deeper losses.

Motilal Oswal Financial Services stated in a note that the Indian equity market might be approaching the final phase of its ongoing correction, unless an unexpected and severe risk emerges to disrupt this trend. The firm suggested that the current downturn could be nearing its end, barring any unforeseen shocks that could significantly alter market dynamics.

The information technology (IT) sector faced notable pressure during the session, with the Nifty IT index dropping around 3% to reach an eight-month low. This decline also marked the confirmation of a bear market in the IT sector, as the index has now fallen more than 20% from its record closing high, which was recorded on December 13. The sustained weakness in IT stocks reflects broader concerns about the sector’s outlook, driven in part by global economic uncertainties and subdued investor sentiment.

Infosys and Wipro emerged as the biggest losers among IT and Nifty 50 stocks during the trading session, reflecting significant pressure within the technology sector. Infosys saw a sharp decline of 4.3%, while Wipro also faced substantial losses, dropping by 3.3%. The steep fall in these two major IT stocks contributed heavily to the broader weakness in the sector.

The decline highlights the growing strain on the IT industry, which has been grappling with concerns over slowing global demand and economic uncertainty. The poor performance of Infosys and Wipro not only weighed on the Nifty IT index but also dragged down the overall sentiment in the Indian equity market.

Infosys and Wipro faced fresh pressure after leading brokerage firms revised their ratings on the stocks, reflecting growing concerns about the future performance of the IT sector. Morgan Stanley downgraded Infosys from an “overweight” rating to “equal-weight,” signaling a more cautious outlook on the stock’s potential. Meanwhile, Motilal Oswal adjusted its stance on both companies, cutting Infosys to a “neutral” rating and downgrading Wipro to a “sell” rating.

The downgrades were largely driven by concerns that a potential recession in the U.S. could dampen discretionary spending, which would directly impact the Indian IT sector. A significant portion of revenue for Indian IT companies comes from the U.S. market, making them vulnerable to any slowdown in economic activity or corporate spending in the region.

Adding to the uncertainty, U.S. President Donald Trump initially announced plans to double tariffs on Canadian steel and aluminum, only to reverse the decision a few hours later. The abrupt policy shift heightened market jitters and deepened concerns about the stability of the U.S. economy. This added to the already fragile sentiment surrounding the IT sector, as any economic slowdown in the U.S. could further weaken demand for technology services and outsourcing.

Out of the 13 major sectors in the Indian stock market, five closed in negative territory, reflecting a mixed performance across different segments. Broader market indices also faced weakness, with mid-cap stocks declining by 0.2% and small-cap stocks falling by 0.6%. The losses in the broader market indicated cautious sentiment among investors, particularly toward smaller and mid-sized companies.

In contrast, the financial sector stood out as a bright spot, with the Nifty Financial index rising by 0.5%. Gains in heavyweight financial stocks helped offset some of the broader market weakness. HDFC Bank and Kotak Mahindra Bank were among the top performers in the sector, climbing 1.5% and 2.5%, respectively. The strength in financial stocks provided some stability to the market despite the broader weakness in other sectors.

After market hours, government data revealed that India’s consumer price inflation (CPI) for February had eased to 3.61%, coming in lower than Reuters’ forecast of 3.98%. The decline was primarily attributed to moderating food prices, which helped bring down overall inflation levels. The softer inflation data suggested that price pressures were easing, which could have potential implications for future monetary policy and consumer spending trends.

Market participants are now turning their attention to the upcoming U.S. inflation data, scheduled for release later in the day. This data is expected to play a crucial role in shaping expectations around future interest rate decisions by the U.S. Federal Reserve.

Investors are closely monitoring the inflation figures, as they could provide insights into the pace at which inflationary pressures are easing or persisting in the world’s largest economy. The Federal Reserve’s response to the data—whether through maintaining, raising, or cutting interest rates—could have far-reaching effects on global financial markets, including capital flows and currency movements. A higher-than-expected inflation reading might reinforce the need for tighter monetary policy, while a softer reading could support a more dovish stance. The outcome of this data release is likely to influence market sentiment and investment strategies in the near term.