22 May , 2025 By : Debdeep Gupta
The shares of IT companies tumbled on May 22, tracking Wall Street peers over concerns of a possible widening of US federal deficit, pushing the Nifty IT index down nearly 1.4 percent in the early trade.
US Republican lawmakers are currently finalizing a new budget proposal that includes tax cuts, however, investors worry that the package, facing significant disagreements over tax deductions, may enlarge the country's federal deficit. Concerns in the US bond market weighed on sentiment, coming close on the heels of last week’s downgrade of US debt by Moody's.
The uncertainties have pushed the yields on the US' long-term government bonds lower, leading to a widespread selloff on Wall Street. The US market slump spilled over to Asia as well, with Japan's Nikkei 225, South Korea's Kospi and Kosdaq, along with Hong Kong's Hang Seng index, tumbling over one percent each in morning trade.
Benchmark indices Sensex and Nifty too opened in the red on Thursday, with IT being one of the worst-performing sectors. Domestic IT companies derive a major portion of their revenue from the US, and concerns over US fiscal and economic health could impact business prospects of IT majors too.
Tech Mahindra was the top loser on the Nifty IT index, tumbling over 2 percent to trade at Rs 1,564.70 apiece. Persistent Systems, HCL Tech, and Mphasis shares followed, dropping over 2 percent each as well.
Heavyweights TCS and Infosys fell over 1.4 percent each, while Wipro dropped over 1 percent. LTI, Mindtree, and Coforge shares were trading in the red with marginal losses.
The IT stocks have seen significant volatility recently. After a strong rise, the stocks significantly fell after rating agency Moody's cut the US government's credit rating from AAA to AA1. It cited the ballooning fiscal deficits and the strain of refinancing existing debt amid elevated interest rates as the reasons for its downgrade.
The IT stocks will be kept under active watch, as they attract strong investor interest. "For India, IT sector is important. It is what oil has been to Saudi Arabia," market expert Manish Chokhani said while speaking at the Mirae Asset Capital Markets Invest India Conference 2025.
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