Infosys Ltd shares on the National Stock Exchange (NSE) fell 3.39% to 1,029.30 rupees on Tuesday, hitting an intraday low of 1,026 rupees. The drop was a key driver behind the Nifty IT index's 2.23% decline, which closed at 27,012.05. Over the past week, Infosys has dropped nearly 10%.
The Nifty IT index has lost 13% over the last three weeks, while the broader Nifty 50 index gained 2% during the same period, according to Business Standard. The index hit a 52-week low on Friday and has fallen 6% over the last four sessions.
Infosys holds a 27.08% weight in the Nifty IT index, according to the NSE Indices factsheet dated May 29. Tata Consultancy Services (TCS) follows at 19.71%. This heavy weighting means that Infosys's decline accounted for about 0.9 percentage points of the Nifty IT's 2.23% slide, or roughly 40% of the sector's loss. Other IT stocks also fell: TCS dropped 3.21%, Wipro lost 3.16%, and HCL Technologies slipped 1.86%.
The selloff in Infosys highlights a broader risk for investors in sector funds. The Nifty IT index is used as a benchmark for portfolios and underlies index funds, ETFs, and structured products. Consequently, any portfolio tracking this benchmark is heavily exposed to Infosys, regardless of individual stock preferences.
Weak demand signals have been a major concern. Accenture recently cut its annual revenue outlook and issued a weaker-than-expected Q4 forecast, dampening sentiment across the IT sector. Morgan Stanley noted that after Accenture's guidance, a pickup in second-quarter growth looks less likely. Mayuresh Joshi, head of equity research at William O'Neil & Co, told Reuters that the market was looking for growth, but it is "clearly missing." Pritesh Thakkar at PL Capital added that Indian IT companies are facing slower deal signings and extended decision cycles.
Indian equities broadly declined on Tuesday, with the Nifty 50 and Sensex both falling 1.16%. Analysts at Jefferies and Morgan Stanley cited weak demand signs following Accenture's outlook. Additionally, soft PMI data and concerns about the monsoon weighed on sentiment, according to Anita Gandhi of Arihant Capital Markets.
At its annual general meeting on Tuesday, Infosys pushed back against concerns about AI disruption. Chairman Nandan Nilekani told shareholders, "AI will not replace companies like ours," emphasizing that large companies are not yet deploying AI at scale, which presents an opportunity. Infosys reported that it is already working with 90% of its top 200 clients on AI and estimates the AI-first services market at $300 billion to $400 billion by 2030.
Infosys CEO Salil Parekh noted that clients are demanding "modernization of technology using agents." In its AGM presentation, Infosys disclosed that AI revenue accounted for 5.5% of sales, or about $1 billion annually, at the last reporting. This metric will be closely watched by investors to gauge whether AI is offsetting lost discretionary projects or merely alleviating broader pressures.
The outlook for Infosys and the sector remains uncertain. A strong earnings call on July 23 or clearer signs that AI is driving revenue could trigger a rebound. Conversely, if Accenture's deal delays expand into a wider spending freeze, Indian IT stocks could face further pressure, with Infosys likely to have the most significant impact due to its index weight. Infosys's board will approve its June-quarter results on July 23, followed by analyst calls to discuss the numbers and outlook.
