Nifty IT Slides Nearly 3% as US Fed Rate Hike Concerns Weigh on Tech Stocks

Indian information technology stocks came under sharp selling pressure on Monday, September 7, with the Nifty IT index falling nearly 3% as concerns around a possible U.S. Federal Reserve rate hike weighed on the sector. 

All constituents of the IT index traded in negative territory during the session. The index touched an intraday low of 29,847.25, marking a decline of 2.7% from its previous close. 

Infosys recorded the steepest fall among IT stocks, dropping 3.8% at the day’s low. LTIMindtree, Persistent Systems, Mphasis, Wipro and Coforge declined close to 3% each. 

TCS, Tech Mahindra, HCL Technologies and Oracle Financial Services Software (OFSS) also remained under pressure, losing between 2% and 3%. 

The latest decline adds to an already weak year for the technology index. Nifty IT has fallen nearly 22% so far this year. Over the past one year, the index has declined 13.67%, while it is down 5.21% over the one-month period. 

US Federal Reserve Meeting in Focus 

Concerns surrounding the US Federal Reserve’s next policy decision have emerged as a key factor behind the weakness in domestic technology shares. 

According to the CME FedWatch tool, the probability of a rate hike has risen to 58%, compared with 47% a month earlier. 

Market expectations also shifted after U.S. Federal Reserve Chair Kevin Warsh’s Jackson Hole speech last week, where his comments on inflation were interpreted as hawkish. 

The Federal Reserve’s next meeting is scheduled for September 15-16. It will also be the first Federal Open Market Committee meeting under Warsh as the new Fed Chair. Last month, he indicated that bringing inflation under control remained the central bank’s top priority. 

Higher US Rates Raise Concerns for Indian IT 

Expectations of tighter monetary policy in the U.S. have implications for India’s technology sector because large Tier-1 IT companies derive a significant part of their business from the U.S. and North American markets. 

Higher interest rates could lead businesses in the U.S. to reduce discretionary technology expenditure, potentially affecting the business pipeline of Indian IT companies. 

The sector is also facing pressure from higher global bond yields and uncertainty linked to elevated crude oil prices. 

Against this backdrop, the sharp fall on Monday kept technology shares among the weakest pockets of the Indian equity market, with every constituent of the Nifty IT index trading lower during the session.