IT shares fall after 3-day gaining streak; Mphasis, HCLTech among top losers: Here are three reasons

Stock market today: IT shares see profit booking. 

IT shares witnessed profit booking on Tuesday after a three-day rally during which the sector had gained up to 2 percent.

The Nifty IT index declined over 1 percent during the session, emerging as one of the top sectoral losers on the benchmark index. All 10 constituents of the index were trading in the red.

Mphasis was the worst performer in the pack, falling 1.75 percent to Rs 2,847.50 on the NSE. Oracle Financial Services Software and HCL Technologies followed, declining 1.71 percent and 1.66 percent, respectively.

Infosys, Tata Consultancy Services, Wipro and LTIMindtree were also among the major laggards, slipping up to 1 percent.

Reasons for the decline

1) Profit booking: IT shares had risen up to 2 percent over the past three sessions. The fall on Tuesday was largely attributed to profit booking at higher levels.

2) Caution ahead of US jobs data: Investors remained cautious ahead of the release of US jobs data for November by the Bureau of Labor Statistics later in the day. The data is closely tracked for signals on the interest rate outlook in the US, which can influence global capital flows. Indian IT companies derive a significant portion of their revenue from US clients, making the sector sensitive to developments in the US economy.

3) Brokerage view on IT sector: Global brokerage Citi has reiterated its cautious stance on global and Indian IT services, citing a slow recovery in demand, The Economic Times reported on Tuesday. Among domestic companies, the brokerage prefers Infosys and HCL Technologies in the large-cap IT space, the report said.

According to the brokerage, the overall demand environment remains stable but lacks clear signs of a rebound, despite expectations of a macro-led recovery, including from potential interest rate cuts by the US Federal Reserve. Discretionary spending remains relatively muted across most segments, barring banking, financial services and insurance, Citi said.