Infosys, TCS, HCL, Tech Mahindra shares fall up to 5%; what triggered sell-off in IT stocks?

Information technology (IT) stocks witnessed sharp selling on Wednesday, with BSE IT index plummeting over 4%. All IT heavyweights were trading in red, with Tata Consultancy Services (TCS), Infosys, HCL Tech, Wipro, Tech Mahindra, and L&T Technology Services falling in the range of 3-5%.

Meanwhile, the BSE benchmark Sensex and NSE Nifty50 were down by 0.6% amid mixed cues from global peers amid uncertainty over U.S. President Donald Trump’s tariff plans and looming fear of recession in the world’s largest economy. All three major U.S. stocks ended lower overnight, with the Dow Jones Industrial Average closed lower by 1.14%, while the S&P 500 dropped 0.76% and the Nasdaq Composite slipped 0.18%.

Infosys was among top losers in IT space, plummeting as much as 5.5% to ₹1,569.35 on the BSE, while its market capitalisation slipped to ₹6.51 lakh crore. Early today, the IT major opened 1.2% lower at ₹1,639.65 after ending 2.3% lower in the previous session.

TCS, the country’s most valued stock, declined 2.4%, while Wipro dropped over 3.35%, and HCLTech slipped 2.4%.

Morgan Stanley prefers TCS over Infosys

The sell-off in IT companies was triggered after foreign brokerage Morgan Stanley downgraded Infosys and cut target prices of four stocks, including TCS and HCL Tech.

The brokerage downgraded Infosys' rating to 'equal-weight' from 'overweight,' raising concerns over slowing growth and valuation pressures. The brokerage cut target price by 19% to ₹1,740 from ₹2,150 earlier.

Infosys shares have seen sharp correction in the last three months, falling 21% from its 52-week high of ₹2,006.80 touched on December 13, 2024. The counter touched its 52-week low of ₹1,359.10 on June 4, 2024. At the current level, profit-to-earnings (PE) ratio stands at 23.77.

“We see downside risks emerging for both the revenue growth of Indian IT services and valuation multiples,” said Morgan Stanley analyst Gaurav Rateria in a note.

Morgan Stanley in its latest report said that it prefers TCS over Infosys, Tech Mahindra over HCL Technologies, and Coforge over Mphasis. The global brokerage firm maintained an 'Overweight' stance on TCS with a reduced price target of ₹3,950 from ₹4,660 earlier. It has also retained 'Overweight' rating on Coforge, with a lower price target of ₹9,400. For HCL Technologies and Tech Mahindra, the agency has assigned an 'Equalweight' rating, with lower target prices of ₹1,600 and ₹1,550, respectively.

On IT sector outlook, the brokerage said that the Indian IT services industry is facing a double whammy of global economic turbulence and rapid technological change. These forces are squeezing both the revenue growth and the stock valuations of IT companies.

The BSE IT index, one of the worst-performing sectors after real estate, has fallen 23% in 2025, with TCS, Infosys, Tech Mahindra, HCL Tech shares falling between 16-20%.

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