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5 reasons why investors are selling IT stocks

In an exclusive interview to NDTV's Shweta Rajpal Kohli, Mauritius Foreign Minister Arvin Boolell talks about GAAR, tax treaty, black money and the measures being taken.

IMF managing director Christine Lagarde gives a speech at a special forum preceding in Tokyo.
IMF managing director Christine Lagarde gives a speech at a special forum preceding in Tokyo.

IT stocks were among the biggest underperformers in trade Friday even as broader markets continued to be sluggish for the fifth straight day.

Infosys, India's second biggest software services exporter, traded 1.5 per cent lower at Rs 2,444, while Wipro traded 1.7 per cent lower at Rs 389.55. Shares in TCS, India's biggest IT firm, traded 0.9 per cent lower at Rs 1,229.35.

The BSE IT index traded 1.3 per cent lower, while the broader Sensex was down just 0.4 per cent.

Here are the reasons for the fall in IT stocks.

1) Muted earnings: Some caution has set in as Infosys kicks off the Indian corporate earnings reporting season on July 12.

2) Guidance in doubt: There is a strong buzz that Infosys will lower its FY13 revenue guidance (in dollar terms) due to the cross currency impact.
3) Slowdown palpable: Last month, Infosys had said it would delay the joining dates of over 25,000 engineers it hired from campuses to as late as mid-2013. Now, California-headquarted iGate has said it will delay the joining date of engineers by one, or possibly, two quarters, according to reports.

4) Global economy turning for the worse: Global central banks went on the offensive Thursday, cutting interest rates and increasing bond buying to stimulate growth. But, the move failed to enthuse investors. Analysts termed the move as insufficient to reverse a global economic slowdown. India’s top IT firms are heavily dependent on the U.S. and Europe for business. The US and Europe, which account for nearly 90 per cent of India IT export revenues.

5) China, the second largest global economy, might be in worse shape than previously thought. China cut key rates for the second time in a month. A slowdown in China will adversely affect global economy.

(With agency inputs)