The stock market dropped again on Monday. The fall was led by the IT stocks. The Nifty IT lost 2.56% to 39,504.85 level, declining most among the sectoral index. The IT stocks were sitting as the major losers in the Nifty 50. Wipro lost the most, falling 3.5% intraday. Here are three reasons why IT stocks trade in the red:
US inflationary pressure
New inflation data came against expectations hinting towards a slowdown in the US economy. This caused investors to run for safe havens, raising gold prices and dropping bond yields. The consumer sentiment index from the University of Michigan dropped to 64.7 in February, a nearly 10% decrease. This is a steep decline in value raising concerns regarding higher inflation due to new tariffs. Plus it was accompanied by existing home sales in the U.S. fell more than expected last month to 4.08 million units. The U.S. services purchasing managers’ index also dropped into contraction territory for February. All of these hint that the companies in the US will stop discretionary spending on IT services if inflation rises again. This sent jolts to Indian IT companies’ stock prices.
Continuous FII selling
The Foreign Institutional Investors has been on a selling spree. Out of 15 trading sessions in February, the FIIs were net sellers in 13 sessions. They have sold Rs 36.977 crore in February so far. While they sold Rs 87,375 crore in January. February will be the fourth consecutive month when FIIs sold equities in India.
Tariff worries and deal ramp up concerns for IT companies
The Trump tariff impact continues to be a key overhang for the markets including the technology sector. While the exact ramifications of the tariff structure are yet to be understood, it continues to be a sentiment negative. The Weak deal ramp up that’s being guided for Q4 along with the negative newsflow is also a dampener to overall investor sentiment in the market.