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Informist, Friday, Mar. 7, 2025

MUMBAI – Information technology stocks are expected to remain weak next week, too, amid uncertainty over US trade and tariff policies under President Donald Trump and weak US economic data, analysts said. Latest data showed that growth in US jobs was slower than expected amid federal workforce cuts under the US administration.

US Labor Department data Friday showed non-farm payrolls increased by a seasonally adjusted 151,000 on the month in February, but much less than the 170,000 consensus forecast by Dow Jones. The unemployment rate during the month rose to 4.1%, higher than the 4% forecast by Dow Jones. Last week, US consumer confidence data and surprisingly lower-than-expected jobless claims data had raised worries about a potential slowdown in the world's largest economy, sparking sell-off across global bourses. Tightening the country's labour market was a measure the US Fed had adopted to bring inflation under its target of 2%. 

Valuations of IT stocks have fallen to a comfortable levels, "So now, whenever the market reacts, there will be a good bounce," Rishubh Vasa, a research analyst covering the sector at Indsec Securities, said. Investors will get some clarity on the Jan-Mar financial performance of IT companies from Mar. 15, Vasa said. The positive deal momentum seen in the December quarter is expected to continue in the next quarter. Investors will also watch out for the IT spending budget that will come out by the end of March, Vasa said. Currently, he expects to see a moderate spending outlook, but expects it to pick momentum from June. "...they will wait for two quarters of IT performance and then the spending will pick up June onwards or maybe September onwards," he said. 

On Thursday, Federal Reserve Governor Christopher Waller said he is leaning strongly against a rate cut in the apex bank's upcoming policy meeting in March. He reckons rate cuts later in the year to remain on track if inflationary pressures continue to abate. "I want to see what happens with the February inflation data. Want to see a little bit more with what happens with tariff policies," Waller said at a Wall Street Journal event. Analysts have divided views on US interest rates. Some expect the Federal Reserve to trim rates further given the economic condition or if data shows better growth, while others believe the Fed could even raise rates in a worst-case scenario if inflation spikes. 

Nifty IT index gained more than 1% this week, but ended lower at 37820.45 points on Friday. On Monday, the index had broken its seven-day losing streak, rising nearly 1% from the close of Feb. 28. However, the index was one of the worst hit among sectoral indices Tuesday as US tariffs on Mexico and Canada came into effect, and China retaliated against additional tariffs on it. The losing streak of IT resumed Friday after a two-day relief rally, with eight out of the 10 constituents reporting a fall. 

US' tech-heavy Nasdaq Composite fell as Trump's announcements on tariffs fuelled investor concerns. The index fell over 10% from its record high hit on Dec. 16. Going forward, the view on the index remains negative, Brijesh Ail, head of technical and derivatives at IDBI Capital Markets & Securities, said. "18300 (points of Nasdaq) was the demand zone which was broken, so eventually it might come back to 17500 levels...that would be a further correction in Nasdaq," Ail said. The domestic IT index is slightly weak and is seen falling till 36000–35500 levels, Ail said, adding that resistance would be 38500 points. 

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Following are the resistance and support levels for the stocks for next week as per calculations by Informist based on their prices on the National Stock Exchange:

End

US$1 = INR 86.87

Reported by Arya S. Biju

Edited by Deepshikha Bhardwaj

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