Information technology stocks took a tumble during the morning session on February 24 as concerns surrounding USA's stuttering economy caused a sharp sell-off. Domestic IT firms that are reliant on services exports to the USA bore the highest brunt of the losses.
On Friday, data revealed that US consumer sentiment hit a 15-month low in February, while inflation expectations soared due to President Donald Trump’s proposed tariffs. Further, US business activity was also declining, with a gloomy outlook seen, adding to investor worries. The long-term inflation target also ticked up to 3.5 percent, from 3.3 percent earlier.
As a result, export-orient IT stocks tanked sharply. With reduced business and consumer confidence, investors are more uncertain regarding the growth outlook of the Indian IT landscape, that depends on US for a large chunk of its revenue.
At 10.45 am, the Nifty IT index sank 2.5 percent, making it the top sectoral loser. All ten index constituents were trading in the deep red, with L&T Technology Services and Persistent Systems leading the losses, cracking up to 5.5 percent.
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Further, there are fears that the US is returning to stagflation, which could hurt global growth prospects, already undergoing a slowdown phase.
Stagflation—marked by slowing growth and rising prices—in the world’s largest economy is a troubling sign for India’s export-driven sectors, particularly IT. It also makes India and other emerging markets less attractive to foreign investors, who may pivot toward safer assets like the dollar and U.S. treasuries.
So far in February, FIIs have net sold Indian equities worth Rs 36,977 crore, while domestic institutional investors (DIIs) have stepped in, net buying shares worth Rs 42,601 crore.
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