The Nifty IT index tumbled in trade on Monday, May 19, after credit rating agency Moody's lowered its rating on U.S., from Aaa, the highest rating, to Aa1.
The sell-off comes amid concerns of sales growth, as these IT players depend on services exports to the U.S. for a large portion of their revenue. Amid a slowing U.S. economy, deal wins from America-based clients are likely to slow down, impacting the topline of these firms.
At 12:50 pm, the information technology gauge Nifty IT index was among the sole sectoral laggards, sinking one percent. The losses were led by Mphasis, Infosys, and Coforge, falling up to two percent in trade.
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Moody’s has become the latest credit rating agency, after Standard & Poor’s in 2011 and Fitch in 2023, to downgrade the United States from its top-tier rating — a move that could further unsettle an already shaky stock market.
The agency lowered the U.S. sovereign credit rating by one level, from Aaa to Aa1, citing the rising costs of managing the country’s debt and persistent budget deficits.
Analysts have suggested the downgrade likely won't cause major market disruption but underscores the worsening U.S. fiscal situation and Washington’s continued reluctance to enact meaningful reforms.
Meanwhile, Treasury Secretary Scott Bessent dismissed the move as a “lagging indicator” tied to developments during the Biden administration. He also cautioned that suspended reciprocal tariffs might be reinstated if other countries fail to negotiate in “good faith.”
International brokerage Morgan Stanley suggested that global macroeconomic shifts and technological changes pose rising risks to the domestic information technology sector, potentially impacting valuations and revenue growth.
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