After a torrid few months, India’s IT sector is looking deeply unloved. The Nifty IT index has plunged to multi‐year lows, down roughly 26% year‐to‐date and many heavyweight names like TCS, Infosys, and HCL Technologies are trading around their 52‐week lows.
What’s behind this sharp downturn?
Markets have panicked over fears of an “AI-driven disruption” and broader tech slowdown. Investors worry that advanced AI (like OpenAI’s announcements) could automate the work typically done by traditional IT services companies, compressing billing rates and deal sizes.
At the same time, macro headwinds such as slowing US tech spending and potential tariffs have spooked foreign investors, triggering heavy
Yet the Q4 FY26 results tell a less dire tale. HCL Tech’s profits and revenues grew (net profit +4.2% in Q4) and deal pipelines remain intact. Independent checks found no evidence of AI-related pricing pressure in the latest contract renewals.
In other words, the fear factor has outpaced reality. As our analysis concludes, Indian IT valuations have now “reset” to attractive levels and most IT services stocks are trading at historically low price multiples, far below their 5-year averages.
Technical Analysis offers an Opportunity
A technical signal underlining the opportunity is the extreme weekly RSI readings on these charts. The Relative Strength Index (RSI) is a popular momentum indicator; readings below 30 typically flag an asset as oversold, often signalling a potential rebound. In the weekly charts of TCS, HCL Tech, and Infosys, the RSI is currently below 30, in oversold territory. Historically, such readings have been rare.
TCS Weekly Chart
TCS’s weekly RSI was last this low during the 2008–2009 financial crisis, and again in early 2020 (when Covid hit), both times followed by multi-year rallies.
HCL Tech Weekly Chart
HCL Tech’s RSI similarly fell into the 20s only during prior market crises (circa 2008, 2012, and 2020).
Infosys Weekly Chart
Infosys, too, previously hit the low-20s on the RSI in late-2011, early-2020, and parts of 2022.
In each case, patient investors who bought in the depths of these sell-offs were eventually rewarded as the business cycle turned.
Why does oversold RSI is an Opportunity?
A weekly RSI below 30 suggests panic or capitulation, often after a sustained downtrend. According to technical analysis theory, “when the RSI is below 30, it signals that the security could be oversold or undervalued, meaning it could be a good time to buy”.
It does not guarantee an immediate rebound, but it highlights an unusually lopsided risk/reward: the shares are statistically “cheaper” on momentum grounds than they have been in years.
In a protracted bear market, RSI can stay low for extended periods, but today’s environment appears more like a sentiment shake-out than a structural collapse.
Indeed, it’s instructive to recall how these stocks performed after past RSI plunges. In early 2009, as global markets bottomed out, Indian IT bellwethers like TCS and Infosys had RSI readings in the low 20s.
Within a few years, TCS had rallied more than 4x from its lows, and Infosys more than 5x, as the tech cycle recovered. Similarly, the COVID-19 plunge of March 2020 pushed all these stocks to their oversold bounds. IT stocks recovered strongly in the v-shape recovery of 2020, buoyed by the surge in demand for digital services.
In the current scenario, macro uncertainties (Fed rates, tech spending cuts, global AI rollout) leave room for near-term volatility, so markets could linger in distress. However, for long-term investors, the charted oversold levels combined with rock-bottom valuations present an attractive risk/reward.
Putting it all together, today’s view is one of cautious optimism. The weekly RSI on the charts is flashing a warning that “we have gone too far, too fast” on the downside. For a long-term portfolio, adding high-quality IT businesses at these valuations could be a savvy move, effectively buying them cheap.
When the broader tech cycle recovers, companies like TCS, Infosys and HCL are well-positioned to benefit from renewed spending.
Are You Buying these IT Stocks?
The current slump has taken Indian tech to an oversold extreme. Buying when prices are falling off a cliff seems counterintuitive, but the charts and fundamentals suggest this is the time when opportunity is knocking.
Valuations are low, earnings growth is on a flat note, and technicals indicate an oversold bounce is looming. Patient investors who look beyond the headlines and focus on long-term trends may find today’s pain is tomorrow’s gain.
Meanwhile, it may be a good idea to add these stocks to your watchlist.
Disclaimer:
Note: The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.
Brijesh Bhatia is an Independent Research Analyst and is engaged in offering research and recommendation services with SEBI RA Number – INH000022075. He has two decades of experience in India’s financial markets as a trader and technical analyst.
Disclosure: The writer and his dependents do not hold the stocks discussed here.
The website managers, its employee(s), and contributors/writers/authors of articles have or may have an outstanding buy or sell position or holding in the securities, options on securities or other related investments of issuers and/or companies discussed therein. The content of the articles and the interpretation of data are solely the personal views of the contributors/ writers/authors. Investors must make their own investment decisions based on their specific objectives and resources, and only after consulting such independent advisors if necessary.
