The shares of major IT players dropped on June 12 after uncertain US tariff rules and geopolitical tensions spooked investors. The Nifty IT index dropped over 1.3 percent to hover around 38,354, snapping a six-day gaining streak.
The IT index is currently the top loser among all the sectoral indices on NSE.
Persistent Systems and Infosys shares dropped nearly 2 percent each to trade at Rs 5,865 apiece and Rs 1,604 apiece respectively. Coforge and HCL Tech shares were meanwhile trading over 1.4 percent lower each. Mphasis, Tech Mahindra and Wipro shares were nearly 1 percent down, while those of Tata Consultancy Services (TCS) and LTI Mindtree were trading with marginal losses.
Here are the key factors that are affect the IT stocks today:
Donald Trump says unilateral tariff rates to be set in two weeks
US President Donald Trump on June 11 said he will set unilateral tariff rates within two weeks. "At a certain point, we're just going to send letters out. And I think you understand that, saying this is the deal, you can take it or leave it," Trump told reporters on June 11. This may have spooked investors on concerns of rising inflationary pressures on the American economy as the countries may retaliate with counter tariffs.
Iran threatened to target US military bases:
Iran threatened to target US military bases in the region if conflict breaks out, while President Donald Trump said he was "less confident" about reaching a nuclear deal.
"All its bases are within our reach, we have access to them, and without hesitation we will target all of them in the host countries," Iran's Defence Minister Aziz Nasirzadeh said in response to US threats of military action if the talks fail.
Notably, Indian IT companies derive a major portion of their revenue from American economy. The rising inflationary concerns and geopolitical tensions are likely to negatively impact their stocks.
IT stocks had seen a sharp rise immediately after markets opened over multiple factors. US President Donald Trump announced that the trade deal between US and China is "done". Further, softer than expected May inflation data further boosted investor sentiment.
US CPI inflation data:
US consumer prices increased less than what was expected in May, according to the latest report released by the country’s Labor Department on June 11. The Consumer Price Index (CPI) increased 0.1 percent in May, lower than the 0.2 percent increase in April. Notably, May’s data is lower than the 0.2 percent CPI estimated by Economists polled by Reuters.
This comes after Trump’s severe tariffs had increased fears of severe inflation, and a possible recession as a result. While the CPI cooled down in May, analysts estimate that the tariffs may hike inflation gradually over the months.
Trump says US-China trade deal is done:
US President Donald Trump took to social media on June 11 to announce that US has finalized a new deal with China. "We are getting a total of 55% tariffs, China is getting 10%." The details of the tariff arrangement are yet to be explained and understood,” he wrote in a post on Truth Social.
However, when reports asked Trump on June 11 if he would extend the deadline for nations to set deals with US, he said he will be open to it. "But I don’t think we’re gonna have that necessity," he added.
"The tariff crisis is not over yet. With Trump's credibility being what it is, it would be too early to discount the development as a positive for markets," said VK Vijayakumar, chief investment strategist at Geojit Investments.
(With inputs from agencies)
Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.
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