The shares of Indian IT companies dropped in trade on December 10, extending losses for the third consecutive session. This comes as investors remain cautious ahead of the Federal Reserve's FOMC meeting outcome later today.
The sharp drop in share prices pushed the Nifty IT index down around 1 percent to 37,808, as seen at 2.30 pm.
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. The outcome of Fed's meeting will likely impact investor sentiment around IT stocks as these Indian companies derive a significant portion of their revenue from the US market.
"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.
The IT index is among the top sectoral loser on the stock markets today. Persistent Systems shares fell more than 4 percent, while Coforge shares dropped nearly 3 percent.
Mphasis, Infosys, Tata Consultancy Services (TCS) and Tech Mahindra (TechM) shares fell nearly 1 percent, while LTIMindtree shares were trading in the red with marginal losses. Wipro and HCLTech shares bucked the trend to trade in the green.
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