Nifty IT slumps 1% as Fed rate hike sparks fresh selling in tech stocks

The weakness in IT stocks was followed by the US Federal Reserve's decision to hike the key lending rate by 0.25 basis points to 3.75-4 per cent.

Nifty IT stumbled 1 per cent in Thursday's trading session, with eight out of ten constituents trading in the red. The Nifty IT was the only laggard in the Nifty sectoral basket as it hit the day's low of 28,805.40, down 0.96 per cent from its last close.

The weakness in IT stocks was followed by the US Federal Reserve’s decision to hike the key lending rate by 0.25 basis points to 3.75-4 per cent. Domestically, in the IT pack, stocks declined in the range of 1-2 per cent. Based on day's low, HCL Technologies emerged as the biggest loser with a 1.4 per cent fall. Tata Consultancy Services fell 1 per cent, menahwile, Mphasis, Wipro, Tech Mahindra, OFSS and Coforge shed nearly 1 per cent each.

In one month’s time frame, the IT index has fallen 6.21 per cent. In July, it recorded its best gain in six months, following a 17 per cent rise.

The Federal Reserve raised interest rates on Wednesday and flagged further increases in borrowing costs in the coming months. Further, new policy projections showed 16 of 18 policymakers anticipate at least one more quarter-percentage-point hike by the end of this year.

Sunny Agrawal, deputy vice president, fundamental research at SBI Securities, said that IT stocks are marginally under pressure due to the rate hike from the US Fed. “Basically, this is on account of the expectation that with increasing interest rates in the US economy, the IT budget going forward can be slashed by US corporates, and that can have some marginal impact on Indian IT companies.”