IT index falls for third day, LTM, HCLTech, lead losses; CLSA turns cautious amid weak macro fundamentals

The latest market report highlights that The IT index declined 1.5% on September 22 with CLSA flagging subdued demand weighing on medium-term earnings outlook.

"IT firms' management demand commentary going into the silent period for September quarter results stays wary at best," stated CLSA, adding that "weak macro fundamentals due to geopolitics, elevated rates and inflation pose downside risk to earnings."

All constituents of the index, barring Oracle Financial Services Software, declined. Shares of Oracle Financial were up over 1% after closing over 8% softer Monday. The firm had clarified post market hours Monday that it isn't aware of developments around debt worth $18 billion for a data centre leased by its parent firm in New Mexico.

At 10:50 am on September 22, Nifty IT was trading 1.5% softer at 28,366.7 with LTM, HCLTech, Mphasis leading the losses by falling 4%, 2.7% and 1.7%, respectively.

"Due to weak macro fundamentals impacted by geopolitics, elevated rates and inflation, discretionary demand stays muted implying more EPS downside risk particularly for Infosys and Wipro. TCS too maintained a wary stance while HCL’s demand commentary remained the most resilient," stated the global brokerage.

"Order books and employee headcount will stay largely stable negating extreme negative repercussions of AI rollouts on renewed deals and IT jobs.

BFSI vertical, thankfully, keeps see resilient demand," further noted CLSA.

It maintained Hold on TCS, Infosys and HCLTech and Underperform rating on Wipro with more downside risk to FY27CL EPS.

Last week, the US The US central bank boosted its benchmark interest rate for the first time in three years to 3.75-4% from 3.5-3.75% in a widely anticipated move. Data from the CME FedWatch tool reveals around 53% of the traders at large expect the regulator to mobilize rates at its next meeting as well.