Nifty IT falls over 1%; Infosys, Tech Mahindra, HCL Tech lead losses as Fed rate hike bets rise

Nifty IT falls over 1%; Infosys, Tech Mahindra, HCL Tech lead losses as Fed rate hike bets rise

Indian IT stocks came under selling pressure in early trade on September 7, with the Nifty IT index falling more than 1 percent. Frontline stocks such as Infosys, Wipro and TCS fell up to 2.5 percent as a strong US jobs report boosted expectations of another Federal Reserve interest rate hike.

The Nifty IT was down 1.27 percent at 30,306.15 around 9:18 am, making it one of the top sectoral losers. The decline was substantially steeper than the broader market, with the Nifty 50 down 0.19 percent at 23,852.90 and the Sensex falling 125 points to 76,390.27.

Five large IT companies featured among the top Nifty 50 losers. Infosys led the decline, falling 2.2 percent to Rs 1,105.10, followed by Tech Mahindra, down 1.57 percent at Rs 1,571.80. HCL Technologies declined 1.37 percent to Rs 1,275.70, Wipro slipped 1.07 percent to Rs 174.52, while TCS fell 0.83 percent to Rs 2,284.90.

The weakness extended to midcap technology stocks as well. Mphasis fell 1.87 percent to Rs 2,379.90, Persistent Systems declined 1.56 percent to Rs 5,566.60 and L&T Technology Services dropped 1.4 percent to Rs 3,443.40, placing all three among the top losers on the BSE Midcap index.

The selling in IT stocks came as expectations of higher US interest rates strengthened following Friday's robust payrolls report. Markets are now pricing in a 58 percent probability of a Federal Reserve rate hike at its September 16 meeting and a 70 percent chance of a move in October, according to Reuters.

Higher-for-longer US interest rates and rising bond yields can weigh on technology valuations globally. For Indian IT companies, whose largest market is the US, a tighter monetary environment can also raise concerns about discretionary technology spending by American clients.

Wall Street had closed lower on Friday following the jobs data, with the Dow Jones Industrial Average falling 0.51 percent, the S&P 500 declining 0.38 percent and the technology-heavy Nasdaq Composite losing 0.29 percent.

Investors will now closely watch the US August inflation report due on Friday for further clues on the Fed's policy path. Median forecasts point to a 0.2 percent rise in core inflation, although there is a risk of a 0.3 percent increase.

The domestic market was relatively resilient despite the weakness in IT shares. Market breadth remained marginally positive, with 1,514 shares advancing against 1,356 declines, while 254 stocks were unchanged. However, the India VIX rose 1.69 percent to 10.86, indicating a modest increase in near-term volatility expectations.

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