Nifty IT in the weak market was the worst loser and was down over 3 per cent at the last count. This is even as the frontline indices were down around 400 points on the Sensex and Nifty slumped below the key 24,400 levels.

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Of the 10 constituents, all of the stocks from the pack witnessed selling pressure, with Wipro leading the losses with a cut of up to 4 per cent. Following, Wipro, other constituents like LTIMindtree, TCS and Infosys all down over 3 per cent.

The sharp drag comes after the US Federal Reserve's hawkish comments concerning interest rate trajectory. 

Atul Parakh, CEO of Bigul said Powell's statement in Dallas that there was "no need to rush" rate cuts, citing robust economic growth and above-target inflation, triggered a broader tech sell-off, with NASDAQ experiencing its steepest single-day decline in two weeks. The correction follows a recent two-week rally in IT stocks.

Over the last one month, Nifty IT has been moving in a range and has moved lower by just over 2 per cent as against Nifty's sharp fall of 6 per cent amid continuous FII outflow.

"This is because the US market accounts for a significant portion of Indian IT businesses' sales. As a result, the industry is more subject to US monetary policy changes. An increase in US interest rates usually tends to make investments in emerging markets like Indian equities- relatively less attractive." added Parakh.

FII selling in IT stocks and the fear that the US government would implement more spending cuts have further pulled market sentiment down. The recently announced Department of Government Efficiency, with its target to shave $2 trillion off federal spending, further added to the sector's near-term uncertainty.

Should investors add or avoid IT stocks?

G. Chokkalingam, Founder-Equinomics believes that it is better to wait as there is no visibility of dollar revenue improving in short term. Also one needs to wait for results of state assembly elections in general before making significant buying of stocks.

Jigar S. Patel, Sr. Manager, Equity Research- Anand Rathi said, "Over the past 2-3 months, the NIFTY IT index has been trading within a tight range of approximately 41,000 to 43,500, reflecting a lack of clear directional movement. Notably, recent recovery attempts in the index have been met with selling pressure, leading to failed higher highs on the daily timeframe."

This pattern highlights a lack of sustained bullish momentum. Furthermore, the daily RSI is currently below 50, signalling underlying weakness in the index. At this juncture, the immediate support is anticipated near 41,000, while resistance is seen around 43,000. Given these factors, a cautious approach is warranted, and it is advisable to book profits during any short-term rallies within the range, he added.