Nifty IT falls over 1% as Infosys, TCS, Coforge drag: Here is what’s impacting IT stocks today

IT stocks came under selling pressure on Monday, September 15, leading sectoral losses and weighing on the main equity benchmark indices.

Nifty IT touched an intraday low of 35,686.15, marking a fall of 1.17%. At the time of writing the article, the sectoral gauge was down 0.63%.

Almost all stocks in the Nifty IT index were trading lower in the late afternoon session on Monday, with Infosys leading the losses, down 0.97%. It was followed by Tata Consultancy Services (-0.82%), Coforge (-0.79%), and Persistent Systems (-0.79%).

Other notable decliners included Oracle Financial Services Software (-0.55%), Wipro (-0.49%), Tech Mahindra (-0.45%), HCL Technologies (-0.45%), and LTIMindtree (-0.02%).

Meanwhile, Mphasis was the only gainer on the index, rising 0.55%.

The fall in IT stocks came on profit booking after a robust 4.3% rally in the previous week. Oracle Financial Services Software (4.3%), Coforge (6.4%), and Infosys (5.6%) led the Nifty IT index gains in the previous week.

Infosys’ board of directors approved its largest-ever share buyback programme valued at ₹18,000 crore last week. This share buyback programme by Infosys matches the biggest-ever such scheme by IT major TCS.

In an exchange filing on September 11, Infosys said that it will buy 10 crore fully paid-up shares of a face value of ₹5 each, which is 2.41% of the total paid-up equity share capital, at ₹1,800 per equity share, a premium of 19.22% from Thursday’s closing price of ₹1,509.7 apiece on NSE.

Market experts said that the big buyback offer by Infosys signals strong confidence in long-term growth prospects and shareholder value creation. The massive buyback offer is expected to create a positive outlook for other IT stocks as well.

Investors also remain cautious ahead of the US Federal Reserve’s policy meeting. The Federal Reserve will announce its much-anticipated policy decision on September 17 as the US economy grapples with high unemployment headwinds.

The CME Fed funds futures indicate a 96% probability of a 25-basis-point cut in the interest rate at the current meeting. The interest rates were kept unchanged for a period of over 9 months after being cut by 100 basis points. Historically, Indian markets too have shown high outperformance over their global peers when US interest rates are on a downward trajectory.

When the US Fed cuts interest rates, it generally leads to lower borrowing costs, increased liquidity, and an overall boost in economic activity, especially in the US market.

A rate cut makes it cheaper for US companies to borrow and invest, leading to increased spending on IT services, which boosts demand for Indian IT firms. This higher demand helps Indian IT companies secure more contracts, improve profit margins, and expand their business.