IT Stocks Tumble: Why Infosys, TCS, Tech Mahindra, and HCL Tech Stocks Are Sliding Nearly 2% Today

IT Stocks In Red: The shares of several IT majors were dragged down on May 22 over rising concerns of speculations linked to broadening of the U.S federal deficit. As a direct result of this, the Nifty IT index went down by as much as 1.4 per cent in early trade.

Currently, the U.S Republican lawmakers are mulling over a tax and megabill, which have got investors concerned over placing the U.S debt reportedly 113 per cent the size of its present economy

The U.S bond market reiterated similar sentiments, coming close to the heels of last week’s downgrade of US debt by Moody's.

Moody's downgraded the US government's credit rating from AAA to AA1 on May 17. This marked a major shift in the country's financial position as it placed it alongside other advanced economies that carry lower debt ratings.

The uncertainties have pushed the yields on US' long-term government bonds lower, leading to a widespread selloff on the 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 lop 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 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.