The shares of IT companies tumbled on June 2 amid escalating trade tensions between US and China. The sharp fall in the share prices pushed the Nifty IT index down over 1 percent to hover at around 36,948 in the morning, extending losses for the second consecutive session.
Earlier last week, US President Donald Trump took to social media to say that China has "totally violated" a trade agreement which was concluded weeks ago by the two countries. "Two weeks ago China was in grave economic danger! The very high Tariffs I set made it virtually impossible for China to TRADE into the United States marketplace which is, by far, number one in the World. We went, in effect, COLD TURKEY with China, and it was devastating for them. Many factories closed and there was, to put it mildly, “civil unrest.” I saw what was happening and didn’t like it, for them, not for us. I made a FAST DEAL with China in order to save them from what I thought was going to be a very bad situation, and I didn’t want to see that happen," Trump said in a post on his social media platform Truth Social.
"Because of this deal, everything quickly stabilized and China got back to business as usual. Everybody was happy! That is the good news!!! The bad news is that China, perhaps not surprisingly to some, HAS TOTALLY VIOLATED ITS AGREEMENT WITH US. So much for being Mr. NICE GUY!" he added.
IT stocks derive a major portion of the revenue from the US economy. When US and China had earlier engaged in strong tariff war, the stocks had tumbled over concerns of a possible US recession as a result of the higher inflation following the tariffs.
The stocks later jumped amid cooling trade tensions. The latest developments however have triggered the downward spiral in the sector again.
Mphasis was the top loser, falling nearly 4 percent to trade at Rs 2,466 apiece. The fall in the share price was fueled after a report said that the company has lost one of its oldest clients, which accounted for 8 percent of the revenue of India’s seventh-largest information technology services firm, after FedEx Corp. selected Accenture Plc to do much of its IT work.
Persistent Systems shares followed, tumbling over 2 percent to trade at Rs 5,515 apiece. Tech Mahindra and Wipro shares were down over 1 percent, while HCL Tech, TCS, Infosys, LTI Mindtree and Coforge shares were trading in the red with marginal losses.
China retaliated by accusing US of violating their trade deal and vowing to take strong measures to defend its interests. The Chinese Ministry of Commerce issued a statement on June 2, rebuking the US president’s claims. "If the US insists on its own way and continues to damage China’s interests, China will continue to take resolute and forceful measures to safeguard its legitimate rights and interests," the ministry said in its statement.
Notably, this comes after the tariff war has slightly cooled between two of the world's largest economies, after severe tit-for-tat tariff measures that triggered recession fears.
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