Information technology (IT) stocks witnessed sharp selling pressure on Wednesday, in sync with the broader market, as higher-than-expected U.S. inflation stoked fears the Federal Reserve will raise rates aggressively in its policy meeting later this month. Weighed down by U.S. rate hike fears, IT heavyweights such as Tata Consultancy Services (TCS), Infosys, Wipro, Tech Mahindra, L&T Technology Services (LTTS), HCL Technologies, and MindTree dropped up to 4% in opening trade.
Among individual stocks, Infosys was the top laggard, with the share price falling as much as 4.25% to ₹1,479.3 on the BSE. The stock price dropped even after the IT major signed a deal with Bpost (Belgium Post), a leading postal operator in Europe, to secure the cloud environment and build robust cyber resilience for Bpost’s mail delivery and logistics services.
The IT space was the worst performer on the sectoral front, with the S&P BSE IT index and Nifty IT index falling over 3% each in opening trade, in line with a sharp decline in Nasdaq Composite, which plunged 5.2% overnight to register its biggest one-day percentage loss suffered since June 2020, during the Covid-19 pandemic.
Meanwhile, the BSE benchmark Sensex dropped as much as 1,154 points, or 1.9%, to slip below psychological levels of 60K to 59,417 in the first hour of trade so far. Similarly, the broader NSE Nifty fell 299 points, or 1.65%, to touch a low of 17,771, with 35 constituents of the 50-share index trading in the red.
In the overnight trade, all three major U.S. indices closed sharply lower, registering its biggest loss in two years, after data showed that inflation rose higher-than-expected in August, which stoked fear that the Federal Reserve would continue its aggressive policy stance to combat rising costs. The U.S. inflation in August climbed to 8.3% y-o-y against expectations of 8.1% and 8.5% in July, as decline in energy prices was offset by higher food as well as shelter costs.
Snapping four sessions gaining streak, the Dow Jones Industrial Average ended 3.9% lower, the S&P 500 tumbled 4.3%, and the Nasdaq Composite plunged 5.2%. This was the biggest one-day percentage loss suffered by the indices since June 2020, during the Covid-19 pandemic.
Back home, IT shares witnessed selling pressure despite fall in Indian rupee, which usually gain during the depreciation of domestic currency against the dollar. The rupee fell sharply against the U.S. dollar in opening trade on Wednesday, following weakness in Indian equities after data showed U.S. consumer prices increased faster than expected in August, prompting bets on more aggressive rate hikes by the Federal Reserve. The rupee opened at 79.58 against the greenback, then fell 43 paise to touch a low of 79.60 over its last close. In initial deals, the local unit also touched 79.54 against the dollar. On Tuesday, the rupee appreciated by 36 paise to close at an over one-month high of 79.17 against the dollar.
Meanwhile, the dollar index, which measures the greenback’s strength against a basket of six currencies, fell 0.03% to 109.77. In the overnight trade, the dollar index climbed 1.5% to 109.85 in its biggest one-day percentage gain since March 2020. The U.S. dollar hit a two-decade high of 110.79 last week.