Nasdaq 3% Plunge on AI Reckoning Hits Indian IT, FII Sentiment Ahead of Weekly Expiry

The Nasdaq 100 tumbled nearly 3% on Friday, its steepest single-session decline since 2022, as disappointing mega-cap earnings ignited a broad reassessment of artificial intelligence investment returns. Intel Corp. plunged 28% after its outlook missed estimates, while Amazon.com Inc. slid on warnings of accelerated capital spending. The selloff rippled across global markets, with European benchmarks closing lower and Asian futures pointing to a gap-down open for Indian indices on Monday. For Dalal Street, the timing is critical: Nifty 50 weekly expiry arrives on Tuesday, November 3, and the Nifty IT index — heavily correlated with Nasdaq moves — faces its biggest test since the 2022 tech correction.

What Happened

According to Hindu BusinessLine, the Nasdaq 100 fell about 3% as earnings reports from key technology bellwethers stoked what traders termed an "AI reckoning." Intel Corp. sank 28% after its forward guidance fell short of consensus, raising doubts about the semiconductor demand trajectory underpinning the AI infrastructure boom. Amazon.com Inc. declined after signaling greater capital expenditure than previously forecast, pressuring margins in the near term. The report notes the selloff was broad-based, with the Nasdaq Composite and S&P 500 also posting significant losses. European shares stumbled at the end of their best month since June, with the STOXX 600 closing in negative territory as concerns over soaring AI infrastructure costs rattled investors.

Why It Matters for India

The Indian equity market's sensitivity to Nasdaq gyrations has intensified in recent quarters. The Nifty IT index, comprising heavyweights such as Tata Consultancy Services, Infosys, HCL Technologies, and Wipro, derives over 60% of its revenue from North America. A sustained de-rating of US tech multiples compresses valuation benchmarks for Indian IT services firms, which trade at a premium to global peers. Moreover, foreign institutional investors (FIIs) have been net sellers in Indian equities for much of October; a risk-off shift in global allocation models could accelerate outflows. The rupee, already under pressure from a strong dollar and rising crude, may face additional depreciation bias if FII selling intensifies. Domestic institutional investors (DIIs) have provided a buffer, but their capacity to absorb sustained FII liquidation is finite.

Market Impact

Nifty 50: The index closed Friday at 24,854. Key support now sits at 24,800 (20-day EMA), with a breach opening the door to 24,600 — the 50-day EMA. Resistance is at 25,000, the psychological and call-heavy strike for Tuesday's weekly expiry. Max pain for the November 3 weekly expiry currently resides near 24,900, suggesting pinning risk around that level. Bank Nifty: Less directly exposed to tech sentiment, but vulnerable to broader risk-off flows. The index's monthly expiry is December 29; weekly expiries have been discontinued. Key levels: 51,500 (support) and 52,200 (resistance). Sensex: Tracks Nifty closely; weekly expiry on Thursday, November 5. Support at 81,500; resistance at 82,300. Sectoral: IT — highest beta to Nasdaq; expect 2-3% gap-down open. Banking — relative resilience if FII selling rotates into financials. Energy — Indian Oil and GAIL posted strong Q2 results (profit tripling and doubling, respectively), providing fundamental support. Pharma — Sun Pharma's 36% profit drop on exceptional items may weigh on sentiment.

Historical Context

Similar Nasdaq-driven corrections have occurred in March 2020 (Covid crash), January 2022 (Fed tightening), and October 2022 (inflation peak). In each episode, Nifty IT corrected 15-25% peak-to-trough, while the broader Nifty 50 declined 8-12%. The 2022 episode is most instructive: Nasdaq fell 33% from its November 2021 peak; Nifty IT dropped 28% over six months. FIIs sold ₹2.1 lakh crore in Indian equities during that period. DII buying of ₹1.8 lakh crore cushioned the fall. The current backdrop differs — India's macro fundamentals are stronger, earnings growth is robust, and the RBI has policy room — but valuation premiums are also higher.

What to Watch

1. Monday's pre-open: SGX Nifty (Gift Nifty) levels will indicate gap magnitude. A gap below 24,750 signals heightened panic. 2. FII/DII data (released Tuesday): Friday's cash market flows will reveal institutional positioning ahead of expiry. 3. US PCE inflation (Thursday): The Fed's preferred gauge; a hot print could extend the risk-off tone. 4. Q2 earnings deluge: NTPC, Muthoot Finance, Shyam Metalics, and others report Saturday; their guidance will shape sector narratives. 5. Rupee/dollar: A move past 84.20 could trigger RBI intervention and import inflation concerns. 6. Rollovers to December series: Begin in earnest post-November 3 expiry; high rollover costs would signal bearish positioning.

Disclaimer

AlgoIntra provides AI-generated technical data and market commentary, not investment advice. F&O trading involves extreme risk of capital loss.