The shares of IT companies tumbled on May 22, tracking Wall Street peers over concerns of possible widening of US' federal deficit, pushing the Nifty IT index down nearly 1.3 percent.
US Republican lawmakers are currently finalizing a new budget proposal which includes tax cuts, however, investors worry that the package - facing significant disagreements over tax deductions - may enlarge the country's federal deficit. Concerns in the US bond market weighed on sentiment, coming close to the heels of last week’s downgrade of US debt by Moody's.
The uncertainties have pushed the yields on US' long-term government bonds lower, leading to a widespread selloff on the Wall Street. The US market slump spilled over to Asia as well, with Japan's Nikkei 225, South Korea's Kospi and Kosdaq, along with Hong Kong's Hang Seng index tumbling over one percent each in morning trade.
Benchmark indices Sensex and Nifty too closed in the red on Thursday, with IT being one of the worst performing sectors. Domestic IT companies derive a major portion of their revenue from the US, and concerns over US fiscal and economic health could impact business prospects of IT majors too.
Wipro shares were the top loser on the index, dropping nearly 2 percent to close at Rs 246.05 apiece. Tech Mahindra shares also tumbled nearly 2 percent to end the session at Rs 1,572 apiece.
Persistent Sysytems, TCS and Infosys fell over 1 percent each, while HCL Tech, Mphasis and LTI Mindtree shares closed in the red with marginal losses.
The IT stocks have seen significant volatility recently. After a strong rise, the stocks significantly fell after rating agency Moody's cut US government's credit rating from AAA to AA1. It cited the ballooning fiscal deficits and the strain of refinancing existing debt amid elevated interest rates as the reasons for its downgrade.
The IT stocks will be kept under active watch, as they attract strong investor interest. "For India, IT sector is important. It is what oil has been to Saudi Arabia," market expert Manish Chokhani said while speaking at the Mirae Asset Capital Markets Invest India Conference 2025.
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.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
Find the best of Al News in one place, specially curated for you every weekend.
Stay on top of the latest tech trends and biggest startup news.
