Indian IT stocks fall over 1% as Fed rate-hike bets rise; Infosys, Tech Mahindra lead losses
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Indian IT stocks fell sharply on September 7 as a strong US jobs report boosted expectations of a Fed rate hike, with Infosys, Tech Mahindra and other majors among the top Nifty 50 losers while the broader market stayed relatively resilient.
Indian IT stocks came under pressure in early trade on Monday, September 7, after stronger-than-expected US jobs data fuelled expectations of another Federal Reserve rate hike. The Nifty IT index fell 1.27% to 30,306.15 around 9:18 am, making it one of the biggest sectoral losers in the domestic market.
The decline was sharper than the broader market. The Nifty 50 was down 0.19% at 23,852.90, while the Sensex fell 125 points to 76,390.27.
Infosys, Tech Mahindra among top Nifty 50 losers
Infosys led the decline among major IT stocks, falling 2.2% to Rs 1,105.10. Tech Mahindra was down 1.57% at Rs 1,571.80, while HCL Technologies declined 1.37% to Rs 1,275.70.
Wipro slipped 1.07% to Rs 174.52 and TCS fell 0.83% to Rs 2,284.90. Five IT stocks featured among the top Nifty 50 losers in early trade.
The selling was not limited to large-cap IT companies. Mphasis dropped 1.87% to Rs 2,379.90, Persistent Systems declined 1.56% to Rs 5,566.60 and L&T Technology Services fell 1.4% to Rs 3,443.40. All three were among the biggest losers on the BSE Midcap index.
Why are IT stocks falling today?
The weakness in IT shares followed Friday's strong US payrolls data, which strengthened expectations that the Federal Reserve could raise interest rates again.
Markets are currently pricing in a 58% probability of a rate hike at the Fed's September 16 meeting and a 70% probability of a hike in October, according to Reuters.
Higher US interest rates and rising bond yields can put pressure on technology stock valuations. For Indian IT companies, the US factor is particularly important as America remains their largest market. A tighter monetary environment could also raise concerns around discretionary technology spending by US-based clients.
US markets closed lower after jobs data
US equities ended lower on Friday following the release of the jobs data. The Dow Jones Industrial Average declined 0.51%, while the S&P 500 fell 0.38%. The technology-heavy Nasdaq Composite ended 0.29% lower.
The weakness in global technology stocks added to the cautious tone around Indian IT shares at the start of Monday's session.
US inflation data in focus
Investors will now turn their attention to the US August inflation report, scheduled for release on Friday. The data could provide fresh signals on the Federal Reserve's interest-rate trajectory.
Median forecasts point to a 0.2% increase in core inflation, although a stronger 0.3% reading remains a possibility.
Broader market remains relatively resilient
Despite the sharp decline in IT stocks, the broader domestic market showed some resilience in early trade. Market breadth remained marginally positive, with 1,514 stocks advancing against 1,356 declining, while 254 stocks were unchanged.
The India VIX, however, rose 1.69% to 10.86, pointing to a modest increase in near-term volatility expectations.
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This article is for informational purposes only and should not be considered investment advice from Kotak Neo. For compliance T&C and disclaimers, Visit www.kotakneo.com/disclaimer
Rochelle Britto has spent 8+ years decoding India's markets, businesses, and consumer economy, reporting for ET Prime and Times Internet along the way, covering the stories behind the numbers.
A Mumbai native and perpetual planner of the next holiday, she stays far, far away from the eternal question, “Where are we going next?” When she's not chasing headlines, she's chasing new cultures, open roads, and a bit of quiet in nature.
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