Indian IT stocks faced constant selling pressure in today’s trading session. Starting with the opening bell, the stocks experienced a downward momentum, resulting in the Nifty IT index falling by 2.57% to hit an intraday low of 33,576 points, hitting the lowest level in CY24.
The sharp decline in stocks reflects a broader market trend of selling pressure, exacerbated by rising tensions in the Middle East.
Apart from this, tax-sensitive IT stocks took more of a beating after the release of robust US retail data on Monday. Retail sales in the United States grew by 0.7% month-on-month in March 2024, beating forecasts of 0.3%, which strengthened the belief that the Federal Reserve may not rush to implement interest rate cuts this year.
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According to Business Economics data, eight out of thirteen categories recorded increases, indicating that consumers continued to spend faster than expected despite persistent inflationary pressures.
Given the strong retail data and elevated inflation print for March, analysts anticipate the Federal Reserve may delay rates until July or September instead of June.
Moreover, the mixed results of IT major Tata Consultancy Services also dented investor sentiment on IT stocks. The IT major on Friday reported smaller-than-expected fourth-quarter revenue as cautious spending by customers amid macroeconomic uncertainty remains looming.
Investors are eagerly awaiting results from other industry leaders such as Infosys and Wipro later this week to gain insight into the FY25 outlook.
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Analysts had earlier forecast modest revenue growth for Indian large-cap IT companies in the fourth quarter of fiscal 2024. This projection reflects continued weak demand trends due to weak discretionary spending and cautious customer behavior amid a volatile global macroeconomic landscape.
At the time of reporting, all 10 items of the index traded in the red. Coforge experienced the most significant decline, with a drop of 3.3%. Following closely were Infosys, Mphasis, LTIMindtree, Wipro, and HCL Technologies, all showing cuts exceeding 2%.
Looking at the benchmark indices, both the Nifty 50 and Sensex extended their decline for the third consecutive session on Tuesday. The Nifty 50 fell 0.86% to hit an intraday low of 22,079, while the Sensex fell 0.97% to hit an intraday low of 72,685.
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Commenting on the market performance, Dr VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said, “Two issues – one economic and the other geopolitical – will continue to weigh on markets in the near term.”
“The economic factor is the rising yields on US bonds (10-year yield is above 4.6%), which reduces the prospects of rate cuts by the Fed this year. High bond yields are negative for risk assets such as equity and will accelerate the selling of FIIs. emerging markets like India,” he added.
Disclaimer: We advise investors to check with certified experts before making any investment decisions.
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Published: 16 Apr 2024, 15:52 IST