Tech stocks slide up to 4% after Infosys hikes entry-level pay; Nifty IT index down 1%

Domestic tech stocks are witnessing heavy losses in Friday's session, December 26, after the country’s second-largest tech company, Infosys, raised its entry-level salaries for freshers, raising concerns on Dalal Street that this could lead to higher operating costs.

Nine of the ten constituents of the Nifty IT index are trading in the red, led by Coforge, which dropped 4%, followed by Mphasis, Tech Mahindra, LTIMindtree, Tata Consultancy Services, and HCL Technologies, which fell between 1% and 1.5%. Infosys shares also traded lower, down 0.5% at ₹1,657 apiece as of 1:45 PM.

Tracking losses in major tech stocks, the Nifty IT index slipped 1% to 38,600 and is poised to end the week 0.2% lower.

Infosys hikes fresher salaries up to ₹21L amid AI talent push

According to social media posts cited and reviewed by Moneycontrol, the tech giant has raised its salaries for 2025 graduates substantially, by up to ₹21 lakh, and the company will soon launch an off campus hiring drive for 2025 engineering and computer science graduates.

As per the Moneycontrol report citing Infosys Group CHRO Shaji Mathew, Infosys is focusing on its AI-first approach across all services, making it crucial to upskill existing employees and bring on board talent with deep expertise.

He confirmed that the hiring will include both on-campus and off-campus drives, with expanded opportunities in the field of Specialist Programmer. Livemint could not independently verify the hiring drive report. We have reached out to Infosys for confirmation, and this copy will be updated with their response.

Top Indian IT giants have, for decades, kept the salaries of entry-level graduates stagnant, while top executives continued to see their pay packages rise manifold. However, the landscape is changing with the emergence of AI and the requirement for deep expertise, prompting companies to offer significantly higher compensation.

Moneycontrol analysis illustrates the widening gap: Between FY12 and FY22, the median salary of IT CEOs jumped 835%, rising from ₹3.37 crore to ₹31.5 crore. In the same period, the median fresher’s salary grew only 45%, from ₹2.45 lakh to ₹3.55 lakh.

Infosys salary hike may modestly impact margins, says analyst

Mr Bhavik Joshi, Business Head, INVasset PMS, said the decision by Infosys to raise entry-level salaries has reopened an important debate around cost discipline and margin resilience in the IT sector. He noted that employee expenses already account for a substantial share of the IT services cost base, and any upward reset at the bottom of the pyramid tends to ripple through the organization.

“While fresher compensation by itself is not the dominant cost driver, repeated adjustments can gradually recalibrate the long-term wage curve, especially in a sector where scale and volume hiring remain central to delivery models,” he added.

In the current phase of uneven global tech spending, Joshi said the immediate margin impact is likely to be modest rather than disruptive. Demand remains selective, deal cycles are elongated, and pricing power is still constrained in several discretionary segments.

Incremental wage inflation may compress operating leverage in the near term if revenue growth does not re-accelerate, but large IT firms have historically absorbed such pressures through utilization optimization, variable pay management, and tighter control over non-core costs.

Medium-term wage pressures could accelerate automation and pyramid recalibration

Joshi explained that the more meaningful second-order implications lie beneath the headline. “Wage compression risk increases when entry-level pay rises faster than mid-band compensation, potentially forcing broader adjustments over time. This may also accelerate pyramid recalibration, with firms becoming more selective in hiring, faster in upskilling, and more aggressive in deploying automation, AI-led delivery, and productivity tools to protect margins,” he said.

From an investor perspective, he added, near-term reactions are likely to be sentiment-driven, reflecting sensitivity to margin pressure during a soft demand cycle. Medium-term interpretation, however, is more nuanced.

"If cost actions are accompanied by productivity gains and stable pricing discipline, the fundamental margin trajectory may remain intact. Viewed through that lens, such wage pressures appear less like a structural shock and more like cyclical noise within a broader normalization phase for the Indian IT sector," he further stated.

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