The Indian stock market saw a sharp selloff in IT stocks on June 19, with the Nifty IT index falling significantly. This came after the US Federal Reserve raised concerns over rising inflation and high tariffs, dampening investor sentiment across the tech space.
Fed’s Outlook Triggers IT Sector Decline
The drop in IT stocks followed the announcement from Federal Reserve Chair Jerome Powell, who warned of “meaningful inflation ahead.” He explained that ongoing tariffs imposed on imports were likely to raise consumer prices in the US. This could reduce discretionary spending, especially in the tech sector—an area where Indian IT firms generate a large part of their revenue.
Wall Street’s recent pullback, driven by fears of a potential conflict involving the US and Iran, also weighed heavily on investor mood. As Indian IT firms closely track US market trends, this has led to increased selling pressure on tech counters.
Brokerage Notes Add to Pressure
Adding fuel to the fire, CLSA and Morgan Stanley issued cautious notes on Indian IT companies:
Morgan Stanley downgraded Tech Mahindra to underweight and set a target price of ₹1,575.
The brokerage also upgraded Wipro to equal-weight with a revised target of ₹265.
Both firms indicated that US discretionary tech spending remains weak, and demand across key verticals is likely to stay muted.
According to Morgan Stanley, IT revenue growth is expected to stay subdued, with deal pipelines not showing strong momentum. CLSA echoed this sentiment, noting that most demand indicators remain soft across industries.
Wipro Defies Trend with Upgrade Boost
While most tech stocks were in the red, Wipro stood out as the only gainer in the Nifty IT pack. The stock managed to rise modestly following Morgan Stanley’s upgrade, offering a rare bright spot in an otherwise negative session for the sector.
Outlook: Challenging Road Ahead for IT Sector
The broader view for Indian IT remains challenging in the short term, with pressure from global macro factors, weak US demand, and muted deal activity. Investors may continue to tread cautiously as they watch for further commentary from global central banks and economic indicators.
IT companies are likely to remain under pressure until there’s clearer visibility on demand recovery, especially from the US market.
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