Tech majors TCS, Infosys, Tech Mahindra drop 2-3%; IT index worst hit sector, slips 2%

The Nifty IT index has lost 1.3 percent in the past week.

Information technology stocks cracked under pressure on December 31, with industry stalwarts like Tata Consultancy Services, Infosys, and Tech Mahindra dropping 2-3 percent. US treasury yields remain elevated above 4.5 percent, putting pressure on growth sensitive stocks like those from the technology sector.

On top of that, Wall Street's technology-heavy Nasdaq Composite index also dropped over 1 percent overnight, sending negative cues for the domestic counterparts. Apart from these, growth expectations for IT majors for Q3 also remain muted due to the weak seasonality, further dampening investor sentiment.

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Bogged down by these factors, most information technology stocks were sunk deep into losses in today's session. While all six large-cap IT majors were down 1-3 percent, mid-cap names like Coforge, L&T Tech, Mphasis and Persistent Systems also lost 1-4 percent. The sharp losses across constituents of the Nifty IT index dragged it over 2 percent lower to emerge as the worst hit sector in trade today.

Manik Taneja of Axis Capital, in an interaction with CNBC-TV18 stated that Indian IT companies are better positioned in a "Trump 2.0" scenario compared to "Trump 1.0."

While Q3 performance is expected to be sequentially weaker, optimism in the US is likely to drive stronger demand for Indian IT firms, Taneja believes. However, Taneja also noted that valuations for Indian IT companies are significantly higher and hence he prefers global tech companies over their Indian counterparts.