IT shares decline up to 3% on profit booking after 2-day rise, Persistent Systems, TCS, HCLTech lead losses; here are likely triggers

IT shares see profit booking in trade today.

• IT stocks fell up to 3 percent as investors booked profits after recent gains.
• Nifty IT index dropped 1.5 percent, erasing gains from previous two sessions.
• US Fed's rate decision and weak dollar contributed to sector's decline.

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IT shares declined up to 3 percent on Thursday after two sessions of gains, as investors booked profits across the sector. Stocks such as Persistent Systems, Tata Consultancy Services (TCS) and HCL Technologies led the losses amid selling pressure.

The Nifty IT index, which had risen 1.2 percent over the previous two sessions, gave up those gains and fell 1.5 percent in trade.

Key factors behind the decline

1) US Federal Reserve decision: The fall came after the US Federal Reserve held interest rates, in line with expectations, citing elevated inflation and resilient economic growth. Markets are not pricing in another rate cut until the June policy meeting. Higher US interest rates tend to support the dollar and Treasury yields, making emerging markets such as India relatively less attractive for foreign investors.

"The Fed decision is likely to lead to short-term challenges in US rate-sensitive sectors. Globally, this may lead to a slight market decline as investors adjust to the expectation of no immediate rate cuts," said Rajesh Palviya, Head of Research at Axis Securities.

The Indian IT sector, valued at about USD 283 billion, derives a significant portion of its revenue from the United States, making developments in the world’s largest economy critical for the industry.

2) Profit booking: After the recent rally, profit booking was seen across IT stocks, leading the Nifty IT index to surrender all its gains from the past two sessions.

Shares of TCS declined more than 2 percent, while Persistent Systems emerged as the biggest laggard, falling up to 3 percent. Wipro, Tech Mahindra, Infosys and HCL Technologies were down up to 1 percent. All ten constituents of the Nifty IT index were trading in the red.

3) Weak US dollar: The US dollar extended its losses this week, slipping to a four-year low against a basket of currencies. A weaker dollar can weigh on Indian IT companies as it reduces the value of dollar-denominated revenues when converted into rupees, impacting earnings visibility for export-oriented firms.

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