The markets are flat, but the tech stocks are under severe selling. The Nifty is hovering around 25,800 but the Nifty IT Index has plunged nearly 2% intra-day. Counters like Infosys, Coforge, MPhasiS and Tech Mahindra saw sharp cuts in intra-day trade.
The big reason why Indian tech stocks are under pressure is the negative sentiment across Wall Street and hawkish comments by the US Fed.
3 reasons why tech stocks are falling today
Here is a detailed analysis of the key factors weighing on tech sector stocks in today’s session
US Markets in the red
The weakness across Wall Street weighed on sentiment across the technology sector. The Dow fell 1.7% and the tech-heavy Nasdaq plummeted 2.3%. The S&P 500 too plunged 1.7% posting their steepest decline in over a month. Devarsh Vakil, Head of Prime Research, HDFC Securities, pointed out that “the weakness on Wall Street may have reflected uncertainty about whether key US economic indicators would be released after the most extended government shutdown in US history.”
White House press secretary Karoline Leavitt told reporters on Wednesday that the October jobs and consumer price inflation reports are “likely never being released” as a result of the shutdown.
Chance of Fed rate cut waning
The other big concern for the US markets is that a growing number of Federal Reserve policymakers in recent days have “signalled hesitation about further interest rate cuts, pushing financial market-based odds of a reduction in borrowing costs in December to near even. Fed officials who spoke recently cited worries about inflation and signs of relative stability in the labour market after two US interest rate cuts this year,” added Vakil. This waning prospect of rate cut also impacted sentiment across Wall Street. The domino effect can be seen in Indian markets too, especially the tech sector.
RBI cushions rupee’s fall
The rupee’s relative resilience also impacted sentiment. The rupee held above its record low, supported by the potential central bank’s intervention, as per money market traders, even as a pullback in hopes of interest rate cuts in the U.S. dented risk appetite and drove global stocks lower.
Most forex market experts believe that the RBI stepped into the spot and non-deliverable forwards market to support the rupee, which has been languishing near its all-time low for much of the week.
