IT stocks drag markets lower; Sensex ends 65 pts lower, Nifty falls 17 pts

Benchmark indices ended with losses for the first time in three days, dragged by a slide in the shares of information technology (IT) companies, following weak earnings by Tata Consultancy Services (TCS).

The BSE Sensex fell 65 points, or 0.1 per cent, to close at 66,408, while the Nifty 50 index dipped 17.35 points, or 0.1 per cent. If not for the losses in IT stocks, both indices could have ended higher.

Infosys, TCS, HCL Technologies and Tech Mahindra were the biggest drag on the market performance. These four stocks alone made a 191-point negative contribution to the Sensex. Meanwhile, a 0.75 per cent gain in top weight HDFC Bank added 75 points to the 30-share index performance.

The Nifty IT index fell 1.7 per cent, the most among NSE’s sectoral indices. Nifty Realty and Nifty PSU Bank indices were only the two other indices to end in losses.

"The underwhelming result of the IT major and its lacklustre near-term prospects exerted downward pressure on the IT sector. Nevertheless, the broad market exhibited strength, primarily in the anticipation of healthy overall Q2 results led by the expansion in India’s operating profit as volume demand is sustained despite global slowdown,” said Vinod Nair, Head of Research at Geojit Financial Services.

TCS, which announced its September quarter financials post market close on Wednesday, failed to meet Street estimates.

It also flagged persistent weakness in client spending. Investors were keenly eyeing result announcements by Infosys and HCLTech, which were due after the market closed.

Overall market breadth was positive on Thursday amid positive global cues. A total of 2,168 stocks advanced on the BSE and 1,501 declined.

Most global markets extended the strong momentum seen this week following a series of dovish remarks from US Fed officials even as Fed minutes and red-hot economic data indicated one more hike may be warranted.

Following the favourable commentary from Fed officials, the market is assigning 91 per cent probability on the US central bank holding rates steady in November, and 72 per cent probability on another hold in December.