The Indian IT sector witnessed a decline on Tuesday, with the Nifty IT index falling over 1% after a three-day rally that had seen gains of up to 2%. All 10 constituents of the index were in the red, with Mphasis being the worst performer, declining 1.75% to Rs 2,847.50 on the NSE. Other major losers included Oracle Financial Services Software, HCL Technologies, Infosys, Tata Consultancy Services, Wipro, and LTIMindtree, which fell up to 1%.
The decline was attributed to profit booking at higher levels, as investors cashed in on the gains made during the previous three sessions. Additionally, investors were cautious ahead of the release of US jobs data for November, which is closely watched for signals on the interest rate outlook in the US. Indian IT companies derive a significant portion of their revenue from US clients, making the sector sensitive to developments in the US economy.
Global brokerage Citi has also reiterated its cautious stance on the global and Indian IT services sector, citing a slow recovery in demand. The brokerage prefers Infosys and HCL Technologies in the large-cap IT space, but notes that the overall demand environment remains stable but lacks clear signs of a rebound. Discretionary spending remains relatively muted across most segments, barring banking, financial services, and insurance.
Citi also flagged uncertainty around the revival of discretionary spending and noted that demand remains slower than historical levels. The brokerage remains neutral on the US IT sector and prefers Capgemini in the European IT space. The decline in the IT sector on Tuesday suggests that investors are becoming increasingly cautious ahead of key economic data releases and are booking profits after the recent rally. However, it is essential to note that the views expressed by experts are their own and not those of the website or its management, and investors should always consult with certified experts before making any investment decisions.