IT Stocks Extend Losing Run To Six Sessions As Rate Fears Hit

Indian IT stocks remained under pressure on 25 September, with the Nifty IT index falling for a sixth consecutive session as higher crude prices and renewed concerns over US interest rates weighed on the sector.

In early trade on 25 September, Infosys and Tata Consultancy Services were among the key drags on the benchmark, falling around 2% and 0.5%, respectively. In the mid-cap segment, Oracle Financial Services Software (OFSS) declined 5%, making it the biggest loser in the Nifty 200.

HCL Technologies, LTIMindtree and Persistent Systems were the only stocks in the Nifty IT index trading higher during the early trade.

At 11:52 am, the Nifty IT was down 0.41% at 28,092.15. The index has now fallen around 4% over the six sessions.

Why Are IT Stocks Falling?

A key concern for the sector is the prospect of higher US interest rates. Crude oil prices above $100 a barrel have added to inflation worries, making investors more cautious about further rate increases by the US Federal Reserve.

Two Fed officials have indicated that additional rate hikes could be needed to bring inflation under control. This follows last week's 25-basis-point increase in the benchmark rate.

Markets are now pricing in a nearly 69% probability of another US rate hike in October, according to the CME FedWatch Tool.

Higher interest rates can put pressure on economic activity and business spending. That matters for Indian IT companies because a large part of their revenue comes from clients in the US and other developed markets.

OFSS Falls 5% On Oracle Data Centre Concerns

In early trade on Friday, Oracle Financial Services Software was among the worst-performing IT stocks, falling around 5%. The decline followed its parent company, Oracle Corporation, which closed more than 3% lower in the US on Thursday.

At 11:53 AM, Oracle Financial Services Software’s share price stood at ₹10,594.00 on the NSE, down 3.01%.

Reports said Oracle had sent a force majeure notice to a data centre developer in New Mexico over delays linked to power availability. The development added to concerns around Oracle's data centre expansion and its ability to bring additional capacity online.

Bond Selloff Adds To Rate Concerns

The latest weakness in IT stocks also comes against a sharp move in global bond markets. US Treasury yields have risen significantly as investors reassess the path of interest rates. Long-term yields have climbed to their highest levels in more than two decades.

The rise in US yields has also supported the dollar. For Indian IT companies, currency movements can affect reported revenue and margins, although the impact varies across companies depending on their hedging and cost structures.

For now, investors are watching crude prices, US inflation and the Federal Reserve's next policy moves as the main factors that could determine whether the selling pressure on IT stocks continues.

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