IT stocks down: What's going on with IT stocks? Why are they falling now? What should ordinary investors do?

News Topical, Digital Desk : Many IT sector stocks have been showing neither a clear uptrend nor a clear downtrend over the past few months. This leaves the average investor most confused: what should one do if the stock is already in their portfolio? And if prices are low, is there an opportunity to buy? Kotak Institutional Equities' report clearly indicates the current dynamics of the sector's weakest stocks, and how investors should approach their decisions.

If you're an IT sector investor and have stocks in your portfolio that have been stuck for a long time, it's important to first understand where the problem lies.

Kotak's report clearly states that the December quarter (3QFY26) is seasonally weak for the IT sector, and this time around, the situation is no different. Companies whose businesses are related to the auto sector and engineering research (ERD) are facing the most pressure, such as KPIT Technologies, Tata Technologies, and Tata Elxsi. According to the report, auto companies are currently postponing spending on new projects. This is directly impacting the growth of these IT companies. This means that their shares are not performing well because their clients are also reducing their spending. Now, the question is: what should you do if you own these stocks? The report clearly suggests avoiding hasty purchases or panic selling. Until auto and ERD demand improves, it would be wrong to expect a rapid recovery in these stocks. If long-term investors are already stuck, a hold strategy may be preferable, but new investments should be avoided for now. On the other hand, some mid-cap IT companies are experiencing comparatively better conditions. Companies like Persistent Systems and Coforge are still experiencing growth. According to the report, these companies have a strong deal pipeline and clients are continuing to work with them. If an investor is determined to stay in the IT sector, shifting funds to these strong names may be a safer option. Now, let's talk about the big names—Infosys, TCS, Wipro, and Tech Mahindra. The report indicates that growth in these companies is currently very limited. There are no new major transformation projects, and most deals are related to cost-cutting. This means these stocks are not doomed, but a sharp rise should not be expected for them at this time. For the average investor, holding and waiting is the wisest course of action here. On a positive note, the rupee's weakness has provided some support to margins, averting a major decline. However, salary increases and limited demand could continue to exert pressure. For the general investor, the report suggests holding ERD and auto-focused IT stocks, avoiding new investments. Strong midcap IT stocks (Persistent, Coforge) offer selective buying/switch opportunities. Large IT stocks hold, await FY27 guidance.

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