TCS, Infosys and Wipro are among the top NIFTY losers; here’s why

Shares of Indian information technology (IT) companies took a hit on Wednesday, September 18, ahead of the crucial US Federal Reserve meeting later in the day that could kick-start the rate cut cycle.

While TCS shares were down 3.99% to ₹4,326 apiece, HCL Technology was the second biggest loser with shares trading 3.79% lower at ₹1,745 apiece. Tech Mahindra shares were trading 3.48% lower at ₹1,594 apiece. Infosys fell 3.47% to ₹1,884 apiece on the NSE, while Wipro slipped 3.1% to ₹534.4 apiece.

As of 2:00 p.m., the NIFTY IT index was down over 3.5%, with all 10 of its components trading in the red. Mphasis Ltd, which is not part of the NIFTY 50 index, declined the most, over 5%, to trade at ₹3,015 level.

The US Federal Open Market Committee (FOMC), the Fed’s chief body for monetary policy, is expected to cut rates for the first time in four years at its meeting today. Though a rate-cut is usually considered a positive for stocks as it holds the potential to boost spending in the economy, the scenario is a little different this time.

Reports suggest that a majority of Wall Street traders—two-thirds — are expecting a rare 50 basis point cut in policy rates at today’s meeting. If this turns out to be true, it would officially stamp out the growing fears of a recession in the US economy.

As most IT stocks are trading near their all-time highs, their stretched valuations are a major concern among investors. Any correction triggered in the broader market due to global macroeconomic concerns could, therefore, hit the sector the most.

Also, a 50-bps rate cut is a negative for the US dollar. If the Fed hints at steep cuts going forward in its commentary, the Indian rupee may strengthen against the dollar. This may weigh down stocks of exporters like IT companies further.

The US central bank has held rates steady since July 2023 after raising them by a record 11 times between March 2022 and July 2023. Experts have already factored in a 25-bps cut by the Fed this time along with a dovish stance, but anything beyond that could raise eyebrows.

The NIFTY 50 index was trading marginally lower at 25,350, down 0.27%, on the NSE at 2:00 pm, amid a mixed trend in the Asian markets.

Overnight, the Wall Street benchmark indices closed little changed ahead of the US Fed interest rate decision. Dow Jones hit a record high during the session, but ended with minor losses. The S&P also hit a new high, but ended flat.