Coforge, TCS, HCLTech, other IT stocks decline up to 4% despite Fed rate cut hopes: Here's why

Federal Reserve chief Jerome Powell

The shares of Indian IT companies dropped in trade on December 9 as investors remain cautious ahead of the Federal Reserve's FOMC meeting outcome scheduled for tomorrow.

The sharp drop in share prices pushed the Nifty IT index down around 1.2 percent to close at 38,130.60. The index has now extended losses for the second consecutive day.

The US Federal Reserve is holding its FOMC meeting from December 9 to December 10. Analysts expect the Fed to make a "hawkish cut", where the language of the statement, median forecasts and Chair Jerome Powell's press conference point to a higher bar for further rate reduction.

The Federal Open Market Committee, which sets monetary policy, is expected to announce on Wednesday that it will lower the benchmark rate by 25 basis points.

Here's what analysts say:

"Sentiment weakened primarily due to rising caution ahead of the upcoming Fed meeting, with investors worried about the possibility of a tighter global monetary stance and its spillover impact on emerging markets," said Ajit Mishra – SVP, Research, Religare Broking.

The​‍​‌‍​‍‌​‍​‌‍​‍‌ Indian IT industry has suffered a blow lately after international customers reduced their spending on non-essential activities, deal pipelines have become very slim and foreign investors, being apprehensive about the macro risks, are still selling, said Siddharth Maurya, Founder & Managing Director, Vibhavangal Anukulakara.

"Automation and AI are changing the IT sector, but the doubt will probably still be there until clients confirm new outsourcing deals. However, market prices have already factored in most of the negative scenario and dividend returns are quite appealing. In fact, this may turn into a value investment situation for long-term, contrarian investors who are willing to tolerate the volatility, over the next 12-18 ​‍​‌‍​‍‌​‍​‌‍​‍‌months," he said.

Top IT losers today:

IT index was the top sectoral loser on the index today. Coforge shares were the top loser on the index, falling more than 4 percent to trade at Rs 1,870.70 apiece.

Tech Mahindra, HCL Technologies and Wipro shares fell around 2 percent each, while Tata Consultancy Services (TCS), Infosys, Mphasis, LTIMindtree and Persistent Systems shares fell nearly 1 percent each.

Follow all LIVE updates from the stock markets here.