IT stocks crash on Cognizant woes, strong rupee
IT major Cognizant’s plan to reduce its workforce in India and strengthening of the rupee to an 18-month high led to selling in the stocks of IT heavyweights on Monday.
The stocks that saw a sharp fall included Tata Consultancy Services, down 1.82 per cent, Infosys (-1.87 per cent), Wipro, (-1.59 per cent), Tech Mahindra (-0.63 per cent) and HCL Technologies (-0.23 per cent).
Commenting on the development, analysts at brokerage Sharekhan said, “Shares of IT companies plunged on reports that Cognizant may slash at least 10,000 jobs, representing 5 per cent of its total workforce, as the company looks to shift its focus from traditional IT services to digital offerings. The strength in the rupee against the dollar also contributed to losses in IT companies’ shares.”
The IT index was the leading sectoral loser on both the BSE (-1.56 per cent) and the NSE (-1.14 per cent).
The rupee on Monday further strengthened to 65.36 per dollar. The currency has been gaining strength after the BJP's convincing win in Uttar Pradesh and strong inflows from foreign portfolio investors.
Asset manager ZyFin Fund, in a report on the rupee, said, “ The Indian currency in recent times has defied its own perception of a high beta currency during the times of a surge in US dollar (USD), riding on Trump trade & expected rate hikes from the US Federal Reserve. Since its low of 68.78 (vs USD) after the demonetisation of high value currency, the rupee is higher by 4.8 per cent till date. On a year to date basis, it’s up by 4.2 per cent. In that period, it has performed very well amongst its emerging markets (EM) peers. It should be noted that some of the EM currencies (Brazil, South Africa & Russia) have appreciated only on back of the rise in commodity prices.”
Vinod Nair, head of research and Anand James, chief market strategist, at Geojit Financial Services, said, "IT stocks continued to bleed, with a firm rupee adding to H-1B visa woes as it would impact their export revenue. Risk appetite was also on a lower note, as the market entered an event vacuum, and investors looking for bargain, rather than chasing price higher, with stocks already at heady highs.”
Ravi Ranjan Prasad