IT Stocks Gain ₹77,000 Crore Amid Banking Sector Decline on Nifty

Indian stock indices showed mixed performance on Wednesday as gains in information technology (IT) stocks cushioned the overall decline in the Nifty 50 index. The rally in IT shares added roughly ₹77,000 crore in market value, yet this was not sufficient to offset losses in the banking sector, which saw a combined drop of about ₹81,000 crore.

The Nifty 50 index ended the day 77.6 points lower, down 0.34 percent, closing at 22,811.35. Similarly, the BSE Sensex slipped by 143.21 points or 0.19 percent, finishing at 73,709.69. Earlier in the session, both indices had fallen by nearly 1 percent. This brings the Nifty to 13.5 percent below its 52-week peak and just 2.8 percent above its recent low. Over the two trading sessions since last Friday, the index has declined by 1.45 percent.

Market breadth was weak, particularly among midcap and smallcap stocks. The Nifty Midcap 150 index fell 1.4 percent, while the Nifty Smallcap 250 dropped 2.3 percent, indicating broader market pressure beyond the blue-chip stocks.

Shrikant Chouhan, head of equity research at Kotak Neo, commented on the day's action, saying, "The equity market was under pressure for most of the session, with only a slight recovery during the closing auction session. Such late rebounds often do not hold, as any gains tend to be reversed the next day." He also noted the market’s oversold condition and pointed out that short-covering helped limit losses toward the close. Chouhan added that the recent Reliance Jio initial public offering (IPO) may have absorbed some liquidity from the market.

The standout performer was the IT sector. The Nifty IT index rose by 2.88 percent, with every stock in the segment posting gains. This pushed the IT index 1.6 percent higher compared to Friday’s close, reversing the declines seen earlier this week.

In contrast, the banking sector struggled. The Nifty Bank index declined 0.92 percent to 54,976.90, and the Nifty Private Bank index was down 1.05 percent. Ten private banks in the index collectively lost ₹25,700 crore in market capitalization. Axis Bank saw its shares fall 2.1 percent, while HDFC Bank dropped 0.7 percent. ICICI Bank was the sole gainer in the private banking group, rising 0.3 percent. State Bank of India shares declined 1.1 percent, marking it as the second-largest drag on the Nifty, reflecting a pullback in state-owned banks after some recent gains.

Options market data for Bank Nifty revealed that sellers have focused on the 55,000 strike price, suggesting expectations that this level will act as resistance until the October 27 expiry. Meanwhile, the largest number of new put options has been written at 51,500, which is significantly below current market levels, indicating traders are anticipating a potential support zone there.

Commodity and bond markets added to the cautious mood. Brent crude oil futures for December delivery traded slightly lower but remained above $109 per barrel on Wednesday evening. Meanwhile, India’s 10-year government bond yield reached a near four-year peak of 7.45 percent during the session, reflecting rising borrowing costs.

Bhavya Shah, a technical research analyst at Stoxbox, explained that current sectoral flows are being influenced by movements in other asset classes. Shah said, "With crude oil prices breaking above $110 and global yields staying above 5 percent, rate-sensitive financial stocks are facing selling pressure, as seen with Bank Nifty’s rejection near 55,800 points. On the other hand, capital is rotating aggressively into defensive technology stocks, pushing the Nifty IT into a strong breakout above its 200-day moving average." He also highlighted that until the Nifty closes above 23,000 points, any upward moves are likely to be met with selling pressure. Support levels between 22,600 and 22,500 could prevent a sharper decline toward 22,000.

Chouhan added that the lack of strong earnings reports from banks, except for ICICI Bank, contributed to foreign institutional investors selling banking shares. In contrast, IT companies attracted buying interest due to robust revenue growth driven by artificial intelligence (AI) initiatives reported in their quarterly results for July to September, which helped counter some negative sentiment.

The Nifty Volatility Index (VIX), a gauge of market uncertainty, rose 6.3 percent to 15.7, indicating that traders are facing higher volatility and remain cautious about near-term market direction.

Overall, Wednesday’s trading session highlighted a divergence between strong performance in the IT sector and persistent weakness in banking stocks. This split underscores the market’s sensitivity to sector-specific earnings and macroeconomic factors such as oil prices and bond yields. Investors continue to monitor these variables closely as they influence market sentiment and capital flows across various industries.