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Informist, Friday, Feb. 28, 2025

By Alina Geogy

MUMBAI – Renewed worries about a slowdown in the US economy led traders to add short positions in information technology stocks Friday. Fresh threats of tariffs by US President Donald Trump and a slump in technology stocks in the US on Thursday also dented sentiment towards domestic IT stocks.

The US' GDP for the December quarter rose at an expected annualised rate of 2.3% after rising at 3.1% in the prior three months, data released Thursday showed. Further, weekly unemployment claims data showed the number of Americans who applied for unemployment benefits last week hit a three-month high. This higher-than-expected weekly jobless claims probably reflected the first wave of lay-offs of federal employees in the US, some media reports said.

There was a sell-off in technology stocks in the US after chipmaking giant Nvidia gave a weaker-than-expected forecast for gross margin. This led to a near 3% decline in technology-heavy index Nasdaq Composite, and also triggered a decline in several technology stocks across the globe.

Among Indian IT companies, shares of Tech Mahindra, Wipro, and Infosys closed lower by 6.3%, 5.7%, and 4.3%, respectively. These companies derive a significant chunk of their revenue from clients based in the US, which is probably why doubts about an economic slowdown in the world's largest country sparked bearish bets in these stocks. Traders added short bets to the options contracts of these companies. Premiums on call options of these companies fell 50-80%.

Shares of LTIMIndtree and Mphasis closed lower by 4.4-5.4%. The Nifty IT index closed more than 4% lower at 37318.30 points Friday and was the worst-hit sectoral index. In the near-term, the Nifty IT index is expected to find support at 36950 points and face resistance at 38000-38400 points, Jay Vora, senior technical and derivatives analyst at Indiacharts, said.

Meanwhile, traders placed bearish positions in the derivatives segment of the Nifty 50 after the benchmark index fell to its lowest level in nearly nine months. Uncertainty around Trump's policies and the threat about tariffs, coupled with fears about a slowdown in the US economy, are weighing on sentiment, analysts said.

Market participants have turned more bearish on the market as the benchmark indices failed to bounce back as expected despite being in oversold territory, Vora of Indiacharts, said. The Nifty 50 has broken its important support of 22400 points, he said. Now, the psychologically important level of 22000 points, followed by 21800 points will be key support levels, he said. "If the index falls below 21800 points, it could revisit the election day's low of 21281 points," he said. The 50-stock index closed at 22124.70 points, down 1.9%, on Friday.

As per options data, there is a huge open interest at the 22000-strike price of the Nifty 50 on the downside, which should get defended, Vora said. The March futures contract of the Nifty 50 closed at a premium of 147.35 points to the spot index. Open interest in this contract rose 12.6% to 18.87 million, according to provisional data.

--Nifty 50 Mar closed at 22272.05, down 411.60 points; 147.35-point premium to spot index
--Nifty 50 Apr closed at 22434.45, down 401.00 points; 309.75-point premium to spot index

--Nifty 50 May closed at 22559.70, down 392.00 points; 435.00-point premium to spot index

HDFC Bank, IndusInd Bank, BSE, Reliance Industries, Polycab India, ICICI Bank, Bajaj Finance, Infosys, Axis Bank, Tata Consultancy Services, Bharti Airtel, State Bank of India, Mahindra & Mahindra, UltraTech Cement, Kotak Mahindra Bank, and Tata Motors were the most active underlying stocks on the National Stock Exchange.  End

Edited by Ashish Shirke

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