Why Are IT Stocks Falling? IT stocks saw profit-taking on Tuesday after a three-day rally in which the sector had climbed up to 2 per cent.
The Nifty IT index fell more than 1 per cent during the session,
making it one of the worst-performing sectoral indices on the benchmark. All 10 stocks in the index were trading in negative territory.
Mphasis led the losses, sliding 1.75 percent to Rs 2,847.50 on the NSE. Oracle Financial Services Software and HCL Technologies followed, declining 1.71 per cent and 1.66 per cent, respectively.
Other heavyweight IT stocks such as Infosys, Tata Consultancy Services, Wipro and LTIMindtree were also under pressure, slipping by up to 1 per cent.
Reasons behind the decline
1) Profit booking:
IT stocks had gained up to 2 per cent over the previous three sessions. Tuesday’s decline was largely attributed to investors booking profits at higher levels.
2) Caution ahead of US jobs data:
Market participants remained cautious ahead of the release of the US November jobs data by the Bureau of Labor Statistics later in the day. The data is closely watched for cues on the US interest rate outlook, which can influence global capital flows. Given that Indian IT companies generate a significant share of their revenue from the US, the sector is particularly sensitive to developments in the US economy.
3) Brokerage view on the IT sector:
Global brokerage Citi reiterated its cautious stance on global and Indian IT services, citing a slow recovery in demand, according to a report by The Economic Times. Among domestic players, Citi continues to prefer Infosys and HCL Technologies in the large-cap IT space.
The brokerage said the overall demand environment remains stable but lacks clear signs of a rebound, despite expectations of a macro-led recovery, including potential interest rate cuts by the US Federal Reserve. Discretionary spending continues to remain subdued across most segments, except banking, financial services and insurance.
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