Nifty IT falls over 2% as strong U.S. jobs data revives Fed rate hike bets

The Nifty IT index fell more than 2% on Monday, September 7, as stronger-than-expected U.S. employment data raised expectations that the Federal Reserve could increase interest rates this month.

Invest in Indian Markets and Unlock Future Potential With 5paisa!

Open Account Now

Infosys, LTIMindtree and Mphasis led the decline. Tech Mahindra, HCL Technologies, Wipro and Tata Consultancy Services also traded lower.

IT stocks extend losses

The Nifty IT index was down 2.24% at 30,007.10 at 11:30 am, according to data reported by Business Standard. The index has lost 4.99% over four consecutive trading sessions.

Infosys fell 3.31%, while LTIMindtree and Mphasis declined 2.95% and 2.86%, respectively. Oracle Financial Services Software was down 2.65% and Tech Mahindra lost 2.59%.

HCL Technologies declined 1.91%. Coforge, Wipro, Persistent Systems and TCS fell between 1.30% and 1.80%, according to the same report.

The IT index had dropped more than 1% in early trading, Moneycontrol reported at 9:33 am, with Infosys, Tech Mahindra and HCL Technologies among the main losers.

Strong U.S. hiring lifts rate bets

U.S. non-farm payrolls increased by 162,000 in August, the U.S. Labor Department said. That was nearly three times the 56,000 increase forecast by economists in a Reuters poll.

The unemployment rate remained unchanged at 4.1%. Labour-force participation rose to 61.6% from 61.4% in July, Reuters reported.

The jobs data prompted investors to raise bets on a Federal Reserve rate increase at its September 15-16 meeting. Short-term interest-rate futures indicated a 57% probability of an increase by Friday afternoon in New York, up from about 55% before the report, according to Reuters.

Bloomberg also reported that swap contracts were pricing in a probability of more than 50% for a September increase after the payroll figures were released.

Broader market trades lower

The Sensex was down 417.25 points, or 0.55%, at 76,098.18 at 11:30 am, Business Standard reported. The Nifty 50 lost 131.10 points, or 0.55%, to trade at 23,769.50.

Market breadth was negative. On the BSE, 1,931 shares advanced, 2,232 declined and 263 remained unchanged, as per the same report.

U.S. equities had also closed lower on Friday after the payroll data. The Dow Jones Industrial Average fell 0.51%, while the S&P 500 and Nasdaq Composite declined 0.38% and 0.29%, respectively, according to Business Standard.

Why U.S. rates matter

A rise in U.S. interest rates can increase borrowing costs and put pressure on corporate technology budgets. Indian IT companies are closely watched during changes in U.S. monetary policy because the country is a major source of revenue for the sector.

The stronger jobs report kept a September rate increase on the table, but the Federal Reserve’s decision will also depend on incoming inflation data.

U.S. producer price inflation data is due on Thursday, followed by the consumer price inflation report on Friday, Reuters reported. Economists surveyed by Reuters expect core consumer inflation to ease to 2.4% in August from 2.5% in July.