The Nifty IT index dropped 1.35% on Wednesday, while the benchmark Nifty ended flat. TCS shed 2% and Infosys fell almost 1.8%.
Analysts said the November US consumer inflation, which inched up 0.1% from the previous month, also weighed down sentiment. Wall Street had expected no increase in the November inflation print. The Fed will consider the latest inflation numbers in its policy meeting. “IT stocks are down as a reaction to the latest inflation data,” said Sumit Pokharna, vice president at Kotak Securities. “Some market traders believe that the Fed does not have inflation under control and will keep rates higher.”
IT stocks have gained between 6% and 20% since October 26 – when the market rebound began – as a softening of inflation data raised hopes of the Fed ending its interest rate hike cycle, leading to hopes of a revival in technology spending in the US.
“The Fed has not yet given a clear statement about its course of action due to which we continue seeing volatility,” said Sneha Poddar, associate VP-equity research at Motilal Oswal. TCS and Infosys are her top picks.Analysts do not expect big upsides in the near-term but it will be crucial for the Nifty IT index to stay above 32,500 to avert further declines. The index closed at 33,041 on Wednesday.
“The Nifty IT index still trades above its 20-day exponential moving average support, placed around 32,500,” said Ruchit Jain, lead research analyst at 5Paisa.com. “Until we see a breakdown below this support, we may see some consolidation in the short term.”