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Nifty IT Index Slides Over 1% Amid Global Tech Sell-off - What's Driving the Decline?

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  Published in Science and Technology on Friday, November 7th 2025 at 3:04 GMT by The Financial Express
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Nifty IT Index Slides Over 1 % Amid Global Tech Sell‑off – What’s Driving the Decline?

The National Stock Exchange’s Nifty IT index fell 1.23 % on Thursday, slipping to 51,500 points from its previous close of 52,120. The fall, the largest intraday drop since mid‑April, sent a ripple through the technology sector and the broader market, prompting traders to reassess exposure to high‑growth stocks. With the index down more than 640 points, the Indian tech industry was the biggest contributor to the Nifty 50’s 0.89 % decline.

Market Snapshot

The rupee weakened 0.55 % against the U.S. dollar, falling to ₹82.30. Gold fell 0.6 %, while the Sensex’s small‑cap and mid‑cap indices recorded sharper losses of 1.3 % and 1.0 % respectively. Even defensive staples such as pharmaceuticals and consumer staples saw a 0.7 % dip, underscoring the breadth of the pullback.

Why Are Tech Stocks Falling?

1. Interest‑Rate Hikes and Valuation Concerns

The primary driver of the sell‑off is the ongoing tightening cycle in the United States. The Federal Reserve’s recent “dot‑plot” signals that it will raise rates further into the year. Higher rates increase the discount rate applied to future earnings, compressing valuations of growth stocks. Analysts have pointed out that the “high‑growth premium” that investors have paid to tech firms is becoming increasingly untenable as borrowing costs climb.

“The tech sector is uniquely sensitive to changes in the cost of capital. Even a modest uptick in rates can trigger a sizable correction in valuations,” explained Rajesh Gupta, senior equity strategist at Axis Capital.

2. Global Equities Pull‑back and Market Sentiment

The U.S. Nasdaq Composite and the S&P 500 closed down 1.1 % and 0.7 % respectively on the same day, reflecting a broader retreat from high‑growth assets. The global tech bubble, which has grown to a 70 % year‑to‑date rally, is now being tested by a mix of macro‑economic data and corporate earnings that have become less robust. When the global sentiment shifts, the spillover effect is swift; Indian tech stocks are no exception.

3. Sluggish Demand in Key Markets

Indian IT firms have a large share of their revenue from the United States and Europe. A slowdown in the U.S. economy, combined with tightening corporate budgets in Europe, has dampened demand for software services and cloud solutions. Companies like Infosys, Wipro, and Tata Consultancy Services (TCS) have acknowledged this slowdown in their latest earnings guidance, prompting a reevaluation of future cash‑flow expectations.

4. Regulatory Scrutiny and Data‑Privacy Concerns

A new data‑privacy regulation in the European Union, the “Digital Services Act”, has increased compliance costs for Indian tech firms operating overseas. While the law does not directly target Indian companies, the heightened regulatory environment is perceived as a risk factor that could affect earnings in the medium term.

5. Currency Pressure

The rupee’s depreciation adds an additional layer of risk. For companies with significant foreign‑currency debt or revenues, a weaker rupee increases the cost of servicing debt and compresses earnings after currency conversion. This has led investors to weigh the impact of currency fluctuations on the balance sheet strength of large IT firms.

Impact on Key Stocks

The decline in these names contributed more than 70 % of the overall index movement, underscoring the sector’s leading role in the downturn.

Analyst Viewpoints

A survey of analysts at the National Stock Exchange highlighted that 68 % of them are adjusting their valuations for Indian IT firms to account for higher discount rates. Several commentators have suggested a “soft landing” scenario for the global economy, but caution that the pace of rate hikes remains a key uncertainty.

“In a tightening cycle, the tech sector has to be resilient, but it cannot ignore the fundamental fact that higher rates translate into higher discount rates,” said Kiran Patel, equity research head at Kotak Mahindra Bank.

Global Context: Links to International Coverage

The article includes links to a Bloomberg story that underscores the same narrative: the U.S. tech sector’s pullback is being fueled by a combination of tightening monetary policy and slowing economic growth. Bloomberg notes that “U.S. tech stocks have fallen 30 % this year, while the broader market has dropped 10 %.” This international trend reinforces the notion that Indian tech stocks are part of a global phenomenon rather than an isolated event.

The article also links to a Reuters report on the European Digital Services Act, which, while not directly targeting Indian firms, is expected to influence the operating environment for technology companies worldwide. Reuters highlights that the regulation will increase compliance costs and may reduce the net present value of future contracts for software firms.

Conclusion

The fall of the Nifty IT index over 1 % on Thursday reflects a confluence of macro‑economic pressures, global equity sentiment, and regulatory uncertainties. Rising U.S. interest rates and a tightening monetary cycle have amplified valuation concerns across high‑growth stocks, while slower demand in key overseas markets and currency headwinds have added to the pressure on India’s tech firms. Analysts caution that unless the global economic environment stabilises and a more favourable risk‑return profile emerges for growth assets, the technology sector may continue to face a corrective phase in the coming weeks.

Investors are advised to monitor earnings guidance from major IT players closely, keep an eye on the trajectory of U.S. policy signals, and remain vigilant about the impact of exchange‑rate movements on the profitability of technology firms with significant overseas exposure.