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India IT Stocks Rebound: Short Covering Fuels Brief Rally
26 Feb
Summary
- Nifty IT index gained 1.6% on Wednesday, ending a five-day losing streak.
- Sector faced sustained pressure in February due to AI-driven revenue anxieties.
- Over 90% of IT derivative positions were rolled over to March series.
Indian information technology stocks experienced a temporary rebound on Wednesday, marking an end to a five-session decline. The Nifty IT index closed 1.6% higher, recovering from a substantial 22% drop seen during the February derivatives series. This brief respite came after significant pressure on the sector throughout February, exacerbated by concerns over new AI tools impacting future revenue and order wins.
Despite the intraday gains, analysts suggest the rebound is likely short-lived. Underlying weakness persists, with a significant majority, over 90%, of derivative positions being rolled over from the February to the March series. This indicates that bearish sentiment largely remains intact, and the bounce was primarily driven by short covering rather than fresh investor confidence.
Experts warn that immediate resistance for the IT index lies between 31,500 and 32,000, with potential selling pressure emerging in this range. Near-term support is seen around 28,500, and the index is expected to trade range-bound with resistance at 32,800 and support at 29,300. Certain stocks like TCS, Infosys, Coforge, and Persistent Systems exhibit weaker technical structures compared to HCL Technologies and Wipro.
