IT bounce breaks 5-day losing run, but analysts warn relief may be short-lived

In a brief rebound, India's IT sector saw a rise on Wednesday, ending a five-day decline as the Nifty IT index increased by 1.6%, closing at 30,526.35. This uptick provided a momentary relief for investors following a substantial 22% drop in the index during the February series. The overall Nifty index also gained 0.2%, reaching 25,482.5. Market analysts, however, remain cautious about the sustainability of this bounce, attributing the rise primarily to short covering rather than a significant influx of new long positions. The IT sector has been under pressure, exacerbated by concerns surrounding revenue prospects after the introduction of new AI tools by Anthropic, leading to a sell-off. Experts noted that despite the technical rebound triggered by an oversold condition, the broader trend in the IT sector suggests continued bearish sentiment, with rollover rates of short positions remaining high. Analysts like Sudeep Shah of SBI Securities and Amit Trivedi from Yes Securities indicated that any rally towards 31,500-32,000 could face fresh selling pressure, potentially pushing the index down to 28,500 in the near future. Investors are advised to approach the sector with caution as the underlying weakness persists amidst the recent volatility.