The Nifty IT fell for the third consecutive session and hit 40,191.95, its lowest since Aug. 16, amid quarterly results announcements of big tech companies in the US.
All constituents of the index were trading in the negative territory since open on Thursday, with Persistent Systems Ltd., Tech Mahindra Ltd., and L&T Technology Services Ltd. falling the most.
The sector contributed 84 points to Nifty's fall as of 12:03 p.m.
In US, as well, the sector dragged the benchmarks on Wednesday. Even as Meta Platforms' sales for the September quarter came in at $40.6 billion, in line with estimates, user growth expectations were lower than expected. The stock fell on Wednesday on lower than expected number of users. In addition, investors were also disappointed by Microsoft's guidance of slower quarterly cloud revenue growth.
On Wednesday, the tech heavy Nasdaq Composite ended at 18,607.93, down 0.6%.
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Despite this, brokerages in India are positive for domestic IT companies, as they assess quarterly results of Google parent Alphabet Inc. and Cognizant. A report by Nuvama said that growth in Alphabet's Cloud bodes well for Indian IT services.
It noted that cloud delivered 35% YoY growth for Alphabet, highest in the last nine quarters—reflecting accelerated growth in google computing services across AI infrastructure, generative AI solutions, and core GCP products.
"AI has become a key contributor to growth, and hyperscalers are aggressively investing to capture AI-led demand surge," it said. "IT companies are starting to see some green shoots in overall demand, although with no material pickup in discretionary spends, yet."
Nuvama said that robust cloud growth of more than 35% (last seen in FY22) bodes well for Indian IT Services companies, and shall translate to an increase in overall growth.
Citi Research's report on Cognizant earnings highlighted that the company's commentary indicates positive momentum in financial services while pockets of discretionary weakness with clients in manufacturing, logistics, aerospace, and automotive industries—similar read through from most Indian IT companies.
"Our view remains that demand has bottomed out, however, the debate is on the pace of recovery; we expect slow and gradual recovery," it said adding that it remains selective and prefers large tiers over mid tiers. Infosys Ltd. and HCLTech are the only neutrals in the sector, it said.
Investors will now look forward to result announcements of Apple, Amazon, Uber, Merck, and Intel due later Thursday.
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