IT stocks: Nifty IT index slips over 2% on fears of slowing US economy

Among sectoral indices on the NSE, the Nifty IT index was the top laggard on Monday, falling more than 2 per cent in early trades during the session. 

  At 9:57 AM, the Nifty IT index was trading lower by 2.30 per cent, at 39,612. It touched an intra-day low of 39,465.75 during the session so far.  While all its ten constituent stocks were trading lower, L&T Technology Servivces shares were the top drag, falling 5.55 per cent, followed by Persistent Systems (down 4.11 per cent), Mphasis (down 3.79 per cent), LTIMindtree (down 3.07 per cent), and HCLTech (down 2.74 per cent).

  The run on IT stocks came following a drop of 2.20 per cent on the tech-heavy Nasdaq index on Wall Street in Friday's session, amid fears of a slowdown in the US economy.

  Further, the Nifty IT index has declined more than 14 per cent from its 52-week high of 46,088.90, hit on August 13, 2024.

  Market experts said fears of a slowing US economy also weighed on the sector's stocks.  Also Read: Stock Market LIVE Updates 

  US economy headwinds

  S&P Global data on Friday showed US business activity dropped to a 17-month low in February. Data showed the S&P Global's flash US Composite PMI Output index fell to 50.4 in February, from a reading of 52.7 in January. 

  Moreover, US consumer sentiment index dropped more-than-expected to a 15-month low, while inflation expectations surged as households worried about President Donald Trump's steep and broad-based tariffs and their impact on their purchasing power.

  Indian IT companies depend a lot on US order flows. According to independent market analyst, Ambareesh Baliga, the incoming weak US macroeconomic data indicates that there can be a slowdown.

  "There is a relation. IT depends a lot on US order flows. These (weak macroeconomic data) are indications that there can be a slowdown" he said.

  Contrarian view

  Despite the weak cues from the US, Hong Kong-based brokerage firm CLSA sees positive signals for the Indian IT sector going into FY 2025-26.

  According to the brokerage firm, cost optimisation is expected to remain in focus for IT companies. Further, in spite of policy uncertainty, CLSA sees the US BFSI sector to be on a growth trajectory, which is a positive for Indian IT companies.

  The brokerage firm further assigned outperform ratings on Persisten Systems, Tech Mahindra, and Wipro, while assigning 'Hold' ratings on HCL and Infosys. It also assigned an 'Underperform' rating on LTIMindtree.