MUMBAI — The last time India’s technology sector was its biggest stock-market drag for three consecutive sessions, the year was 2022 and the Federal Reserve had just started raising rates. On September 3, 2026, the pattern repeated with uncomfortable precision: as the Sensex fell 417 points, Nifty IT contributed the largest single-sector decline, led by Infosys dropping 0.85 percent and Tata Consultancy Services extending its August slide.
The Nifty IT index has now fallen roughly 24 percent in 2026, making it the worst performer among India’s major sectoral benchmarks. Every other sector – Realty, Energy, Infrastructure, Pharma – has found at least a temporary floor. The IT index has not. The reason is structural and it is American: US corporations have not thawed their technology budgets, and India’s software exporters live and die by those budgets.
Infosys, which accounts for a disproportionate share of sentiment in the sector, closed Thursday at its lowest level in 14 months. The Bengaluru company’s shares have been under pressure since its second-quarter revenue guidance disappointed investors in August, a pattern that Wipro compounded when it too trimmed its outlook. Both companies cited slower discretionary spending from US banking, retail, and manufacturing clients – the same clients who drove the post-pandemic IT boom that briefly made Nifty IT the index darling of 2021 and 2022.
TCS, which had already shed 1.79 percent on August 31 when it revised its forward commentary, added further losses on Thursday. The Mumbai-headquartered company is navigating a difficult dynamic: its large deal wins remain robust, but the ramp-up timelines on those deals have lengthened as clients scrutinise implementation costs alongside the underlying software spend. That gap between deal signings and revenue recognition is hitting quarterly numbers in ways that short-term investors find hard to price.
HCL Technologies and Tech Mahindra fell in sympathy, though neither carried news specific to September 3 that would explain individual weakness. The sector’s correlation has tightened as investors treat Nifty IT increasingly as a single macro trade – a bet on whether US corporate confidence returns before India’s exporters are forced into earnings cuts.
The rupee offered no help on Thursday. Trading near 84.20 to the US dollar, the currency was stable enough that the theoretical translation benefit for exporters was present but irrelevant against a backdrop where the underlying revenue itself is not growing. An IT exporter earning flat US-dollar revenue with a weaker rupee can show better headline INR numbers, but the market is no longer giving credit for that translation arithmetic when demand-side questions remain unanswered.
For Infosys and TCS, that pause means fewer new engagements even as the pipeline looks healthy on paper. One analyst at a Mumbai brokerage, speaking to clients this week, described the situation as “a demand drought dressed up as a strategy shift” – meaning clients are using AI uncertainty as intellectual cover for what is essentially a cost-containment posture.
The technical picture for Nifty IT offers no immediate comfort. The index breached its 200-day moving average in June and has not reclaimed it. Several market participants note that institutional positioning remains defensive, with foreign institutional investors running underweight on Indian IT – a stance they have not reversed despite the sector’s 24 percent decline making valuations look more reasonable on paper. The problem with buying a “cheaper” stock in a structurally challenged revenue environment is that the cheapness can deepen before it becomes an opportunity.
Wipro’s situation carries an additional complication. The company is mid-way through a restructuring that CEO Srinivas Pallia launched earlier this year, involving a rationalisation of business units and a sharper focus on large account penetration rather than volume growth. Investors understand the logic but are impatient with the transition costs, which are showing up in margin compression at a moment when top-line growth is already soft.
What would change the picture? Analysts point to three catalysts: a Federal Reserve rate cut that materially reduces US corporate borrowing costs, a clear signal from at least two of the five largest IT companies that Q2 bookings have accelerated, or a rupee move below 85 that makes the translation mathematics too good to ignore. None of those conditions were present on September 3. Until they are, the sector’s performance relative to the broader Indian market is likely to remain a source of frustration for investors who remember what Nifty IT looked like at its peak.
The sector’s underperformance is not an India story. It is a US spending cycle story that happens to land on Indian balance sheets. That distinction matters for how to think about recovery: no domestic policy change, no RBI measure, no government IT initiative can substitute for a genuine upturn in US corporate technology budgets. India’s best IT companies are among the most efficient in the world. Right now, that efficiency is producing excellent execution on a shrinking order book.
