Are IT stocks in oversold territory amid Anthropic threat? Here's a buying level for aggressive investors

Are IT stocks in oversold territory amid Anthropic threat? Here's a buying level for aggressive investors

• Nifty IT index fell nearly 9 percent in three days amid global tech selloff
• AI tool launch by Anthropic sparked worries of disruption in IT services
• Analysts say Nifty IT faces volatility, key support at 34,000–33,000 levels

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IT stocks extended their sharp decline on February 6 amid rising worries around rapid evolution of artificial intelligence. Analysts have suggested key technical levels for investors to watch out for.

The Nifty IT index dropped nearly 3 percent to 35,211.95 on Friday. The index has now fallen nearly 9 percent in just three days amid a global tech selloff since Anthropic launched a new legal AI tool. The index is now heading for its worst week in over four months, and is currently the worst performing sectoral index on the markets today.

AI developer Anthropic launched plug-ins for its Claude Cowork agent last week that can automate tasks across legal, sales, marketing and data analysis. The move has triggered worries of an impending AI-fueled disruption of the data and professional services industry, which were once seen as major beneficiaries of the AI era, according to traders and analysts.

Key technical levels for Nifty IT to watch out for:

The IT stocks have faced difficulty in the short term, as indicated by the failure of the Nifty IT sectoral index to hold key moving averages and move into the oversold area, said Siddharth Maurya, Founder & Managing Director at Vibhavangal Anukulakara.

The analyst added that this is an indication of increased volatility, and such an indicator is not related to the market's failure to sustain an emerging trend. “At this juncture, the sectoral IT stocks must fight to hold on to the support zones, where the stock market may pick up gradually,” he further said.

'Healthy pause than a structural breakdown':

Darshan Rathod, COO of MULTYFI, said that Indian IT stocks are currently undergoing a correction, but this looks more like a healthy pause than a structural breakdown. He explained that after a strong run in the last cycle, valuations became stretched, especially in large and mid-cap IT names. As growth visibility moderated and global tech spending turned cautious, markets started adjusting prices to more realistic expectations, he added.

“From a technical view, most IT stocks are correcting near their long-term support levels and remain above key moving averages on higher timeframes. RSI levels have cooled into neutral zones, which usually signals consolidation rather than panic selling. This suggests that momentum has weakened, but the broader trend is still intact,” Rathod said.

Tushar Badjate, Director of Badjate Stock & Shares, said that Nifty IT has slipped below its 200 DMA on the daily timeframe, confirming a bearish trend shift. He added that the recent fall signals continuation in selling rather than exhaustion. While the index is near trendline support, momentum remains weak, suggesting any bounce is likely to be corrective, he added.

“On the downside, 34,000–33,000 emerges as a key demand zone, supported by the weekly SMA around 34,300, quarterly 20 EMA, and the latest monthly higher low. Until the index decisively reclaims 37,500–38,000, rallies should be viewed as sell-on-rise opportunities,” according to Badjate.

"The index has broken important support levels, and momentum remains negative despite nearing oversold territory. Major stocks like Infosys, Tata Consultancy Services (TCS), and HCL Tech have witnessed technical breakdowns and failed to sustain above resistance zones. RSI readings suggest limited buying strength, while volumes indicate selling pressure. Overall, the trend remains bearish, and any short-term bounce is likely to face resistance. Investors are advised to follow a sell-on-rise strategy and avoid aggressive long positions until the sector shows clear signs of reversal above key resistance levels," said Drumil Vithlani, Technical Analyst at Bonanza.

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