The markets have given up early gains as a result of severe selling pressure in the IT sector. The Nifty IT Index tumbled nearly 2% in intraday trade. In the list of Information Technology sector stocks, key Index majors like Infosys, TCS and HCL Tech are all under pressure. The big question is why are the tech stocks falling?
Here are the 5 big reasons why IT stocks are under pressure today –
IT heavyweights see broad-based selling
All 10 constituents of the Nifty IT index were in the red. Persistent Systems fell the most, slipping nearly 4%, followed by Mphasis, which lost 3%.
Big names like TCS, Infosys, and Coforge were down around 2% each. HCL Tech, Tech Mahindra, Oracle Financial Services, and Wipro also fell between 1–2%. LTIMindtree managed to limit its losses, down just 0.14%.
Weak global cues hit the sector
The IT sector is heavily dependent on demand from the US market. Weak labour market signals from the US raised concerns about slowing economic growth.
Shares of information technology firms fell up to 2% after an initial gain of 0.5%. With jobs data expected to show the slowest hiring pace since the pandemic, worries over a potential slowdown in IT spending weighed heavily on stocks.
Volatility spikes as investors turn cautious
Market volatility also played a role in today’s fall. The India VIX index rose to 11, adding nervousness among traders. Rising volatility, coupled with profit-booking, made IT stocks especially vulnerable.
Spotlight on US jobs data and Fed rate cut
Adding to this, investors are also keeping a close watch on US economic signals.
“The spotlight will also be on the US jobs data later today amid worries about labour market health, while the Federal Reserve’s September 17 rate cut is still on the table despite sticky US PCE inflation data,” said Prashanth Tapse, Senior VP (Research), Mehta Equities. Any weaker-than-expected data could fuel more uncertainty for IT companies that earn a bulk of their revenues from the US.
Overvaluation concerns and shifting trends
Domestic experts also point to market valuations and sector trends as factors behind the weakness.
“The initial enthusiasm witnessed in the market yesterday couldn’t be sustained. The expected short-covering did not happen, bringing the prices down towards the close,” explained Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services. He added that while midcaps and smallcaps remain vulnerable due to overvaluation, largecaps could continue to show relative strength.