Tech Market Faces a Crash, 21-Year History Suggests Recovery on the Horizon
The Indian technology sector, as represented by the Nifty IT index, is hovering near a historically significant support level, offering a promising outlook for recovery in August.
TCS, a major player in the IT sector, is currently hovering near its long-term moving average of 200WEMA, a level that has traditionally acted as a support for the stock price. This support level has held strong even during market panic situations in 2003, 2008, and 2020.
The weekly chart of the Nifty IT index reveals a critical technical support level at the 262-week exponential moving average (WEMA). This level has historically served as a demand zone for the IT sector, indicating potential for a turnaround or stabilization.
The Relative Strength Index (RSI) on TCS's weekly chart has slipped below 35, a level that has historically been a caution zone for bears. This is only the fifth instance since 2008 that TCS has seen such a low RSI reading.
Historical data suggests that the Nifty IT index exhibits positive seasonality in August, with an average return of about 2.40% and a 67% probability of closing positive during this month. This recurring pattern of recovery or gains in August follows generally weaker performance in July. For instance, in 2025, the sector declined sharply by 9.7% in July but is expected to rebound in August based on seasonality.
July 2025 saw significant declines across major IT stocks such as HCL Tech (-15.08%), Persistent (-14.58%), and TCS (-12.28%), pulling the entire index down. However, technical analysis shows the Nifty IT index repeatedly finding support near the 262-week exponential moving average (WEMA), a strong long-term technical level, indicating potential for a turnaround or stabilization.
With seasonality in favour and technical showing strength, August 2025 might be the month when the Indian IT sector regains its lost mojo. Infosys and TCS, which together make up over half of the Nifty IT index, can potentially restore market sentiment with any reversal. LTIMindtree leads the table in consistent positive returns among Nifty IT constituents.
It's important to note that this article is for educational purposes only and is not a recommendation to consider an investment. Investors are strongly advised to consult their advisors before making any investment decisions.
Kiran Jani, the writer of this article, is a well-known technical analyst and trader with over 15 years of experience in India's financial markets. The index reversed from this zone in April 2025, marking it as an important support once again. MPHASIS was the only IT index stock to gain in July (0.06%), offering a glimmer of hope for the sector's recovery. Current market data from early August 2025 also shows mixed individual stock performances, with some IT stocks like HCL Tech showing minor gains recently, hinting at early recovery signs within the index.
Seasonality analysis suggests that August has an average return of 2.40% for the Nifty IT index with a 67% success rate over the last 21 years. The convergence of an oversold RSI and 200WEMA indicates a potential reversal zone for TCS. With DIIs (Domestic Institutional Investors) going 'all in' on three stocks, pushing their stake above 50%, the Indian IT sector may be gearing up for a strong comeback in August 2025.
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- Analyzing current market trends, thecrypto market and Defi industry may also find support at their respective long-term moving averages, similar to how TCS and the Nifty IT index have traditionally found support at theirs.
- Investors might consider diversifying their portfolios to include stocks like TCS and Infosys as the Indian technology sector shows promise for recovery, possibly backed by positive seasonality in August.
- Traders who are tech-savvy and have a keen interest in both stocks and sports may find opportunities in the stock trading market, with significant events like the 202524 Olympics potentially impacting market trends.
- In light of the strong long-term technical levels and positive seasonality, one could potentially make an investment in specific stocks or in the broader market, taking cues from the performance of IT giants like TCS and Infosys.
- As per technical analysis and historical data, a potential turnaround or stabilization in the Indian technology sector could open up opportunities for traders in areas like Crypto, Defi, or even in stocks related to innovative technology like sports-tech, given the increasing integration of technology in sports.
