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Indian IT stocks remained under intense selling pressure in Monday’s trade, with the Nifty IT index emerging as the worst-performing sector amid global uncertainties, cautious brokerage commentary, and rising geopolitical risks.

The Nifty IT index slipped more than 2 per cent to 37,829.30, down 491 points, or 1.28 per cent, marking the steepest decline among sectoral indices. All ten constituents of the index were trading in the red.

Infosys led the losses, falling as much as 3.5 per cent to an intra-day low, followed by HCL Technologies, Wipro, Persistent Systems, and Tech Mahindra, each declining over 2 per cent.

Also read: Financial stocks rally up to 8%; PSU banks, private lenders, NBFCs hit record highs after strong Q3 business updates

Adding to the pressure, global brokerage HSBC cautioned that the IT sector may no longer deliver long-term double-digit compounding returns.

“IT is no longer a long-term double-digit compounding sector. The long-term stock return trajectory is now lower than in the past,” HSBC said, adding that IT stocks are likely to remain more cyclical and volatile, requiring active management.

However, the brokerage noted that a cyclical rebound could emerge in CY26 or FY27, allowing select IT stocks to extend gains beyond recent performance.

According to Jefferies, IT services growth is expected to improve marginally to 4.7 per cent year-on-year in FY27 (in constant currency terms), but will still remain below historical trend levels due to geopolitical uncertainty and AI-led demand drag.

While favourable forex movements and limited hiring may help protect margins, Jefferies believes valuations are unlikely to re-rate given risks to revenue growth assumptions.

The brokerage prefers mid-sized IT stocks, citing better earnings visibility, with Coforge, Sagility India, IKS (upgraded to Buy), and MPhasiS as top picks. Among large caps, Infosys and HCL Technologies remain its preferred names.

Market sentiment was further hit after US President Donald Trump warned that Washington could raise tariffs on Indian imports if India does not cooperate on the Russian oil issue, according to media reports.

The US had earlier doubled import tariffs on Indian goods to 50 per cent in 2025, citing India’s continued purchases of Russian crude.

The Indian rupee remained under pressure, extending its losing streak and inching lower toward the 89.25 mark amid elevated dollar demand. The currency is on track for its ninth decline in ten sessions, as trade-related uncertainty and tariff risks continue to weigh on sentiment.

A weaker rupee typically supports IT margins, but near-term volatility has kept investors cautious.

Fresh geopolitical concerns also emerged after reports that the US attacked Venezuela and detained President Nicolas Maduro and his wife, an action Washington termed the arrest of “indicted fugitives” on narcotrafficking charges. President Trump later indicated potential US control over Venezuela’s oil assets, further unsettling global markets.

IT companies are set to begin announcing their Q3 results next week, with investors closely watching FY26 guidance, revenue outlook, and margin commentary. Brokerages expect furloughs, lower utilisation, and wage hikes to weigh on near-term performance, though deal momentum in cloud, data analytics, and AI remains intact.

According to Elara Capital, mid-cap IT companies are likely to outperform large peers in Q3FY26.

Coforge and Persistent Systems are expected to post over 3 per cent QoQ USD revenue growth

LTIMindtree and MPhasiS may see 1–2 per cent growth

Large caps such as TCS, Infosys, and Wipro are likely to report flat to marginal growth, impacted by seasonal furloughs

Elara prefers TCS and MPhasiS on valuation comfort, while noting muted growth prospects for ER&D players, except Tata Elxsi.

Overall, analysts remain selective on the IT sector, favouring mid-cap names with stronger execution and earnings visibility, even as near-term volatility persists.