Nifty IT Falls 2% Amid Recession Fears & Fed Policy Uncertainty

Indian IT Stocks Slide Amid US Growth Concerns and Dollar Weakness

Indian IT stocks witnessed a sharp selloff on March 19, with the Nifty IT index plunging nearly 2% in afternoon trade, reflecting concerns over slowing US economic growth, a weakening dollar, and upcoming Federal Reserve policy decisions.

Highlights:

• Nifty IT index declines 2% as tech stocks tumble
• TCS, Tech Mahindra, HCL Tech, Infosys, Wipro, Coforge, and Persistent Systems among the worst performers
• US recession fears and global market weakness impact sentiment
• Nasdaq plunges 1.7% overnight, further pressuring IT sector stocks
• Nifty IT index down over 17% year-to-date (YTD)

Tech Stocks Under Pressure as US Recession Risks Grow

At 12:30 PM, shares of Tata Consultancy Services (TCS) fell 2.20%, leading the decline, while Tech Mahindra, HCL Tech, Infosys, Wipro, Coforge, and Persistent Systems each lost close to 2%. The drop comes as investors brace for the Federal Reserve’s monetary policy decision, which could have significant implications for liquidity, interest rates, and global economic growth.

The Federal Reserve’s ongoing two-day policy meeting has added to market uncertainty, with investors closely watching for signals on potential rate cuts or prolonged monetary tightening.

Global Market Weakness Amplifies Selling Pressure

Indian IT stocks mirrored the overnight selloff on Wall Street, where the Nasdaq tumbled 1.7%, driven by recession fears and tightening monetary conditions.

Adding to concerns, the US dollar has weakened, further pressuring Indian IT firms’ earnings outlook since a large portion of their revenue comes from exports to the United States.

Meanwhile, global investors have sought refuge in safe-haven assets, with gold prices surging to record highs, reflecting a cautious sentiment across markets.

Jefferies India: IT Sector Valuations Still Elevated Despite Market Correction

Last week, Mahesh Nandurkar, MD & Head of Research at Jefferies India, cautioned about the fragile outlook for Indian IT stocks, citing that while valuations have come down from historic highs, they still remain 15-18% above long-term averages.

“Investors were willing to pay a premium for IT stocks when the sector enjoyed strong tailwinds—robust US growth and a favorable dollar—but with these factors fading, a 25% premium is no longer justified,” Nandurkar stated in a conversation with CNBC-TV18.

Given ongoing global economic uncertainties, Jefferies sees financial stocks as a more attractive investment option compared to IT stocks in the current environment.

Nifty IT Down, Broader Indices Hold Gains

At 12:30 PM, the Nifty IT index was trading at 35,940, down 1.85% from the previous close. The index has now fallen over 17% since the beginning of the year, significantly underperforming broader market indices.

Meanwhile, the Sensex was up 156.41 points or 0.21% at 75,457.67, while the Nifty 50 gained 69.45 points or 0.30% to 22,903.75.

Despite the downturn in IT, market breadth remained positive, with 2,734 stocks advancing, 780 declining, and 115 unchanged, suggesting continued strength in select sectors outside of tech.