Nifty IT crashes 4.5% to touch 6-month low on U.S. growth worries, biggest single-day drop since April 2023

Stock Market Crash: Indian stocks are witnessing a wave of selling in today’s intraday session, February 28, as escalating global trade tensions prompt investors to flee risky assets in favor of safer investments, intensifying the pressure on equities.

Both the Nifty 50 and Sensex have tumbled over 1.3% in today’s session, with IT stocks at the forefront of the selling pressure. The Nifty IT index, which tracks the performance of 10 leading IT companies, has extended its losing streak for the fifth straight session today, dropping another 4.50% to hit a 6-month low of 37,198—a level not seen since July 2024.

Today’s decline is also the index’s biggest intraday drop since April 17, 2023, when it tumbled 4.71%. All 10 constituents of the index are currently trading in the red, with Tech Mahindra, MphasiS, and Coforge posting losses of up to 6%.

Other index stocks, including Persistent Systems, Wipro, Infosys, TCS, HCL Technologies, and LTIMindtree, are currently down between 3% and 5%.

Rising trade tensions and inflation concerns weigh on IT stocks

Concerns over a slowing U.S. economy—where Indian IT companies generate significant revenue—have shaken investor confidence. The latest U.S. labor market data, released on Thursday, indicated a potential sign of economic softening.

According to media reports, jobless claims for the week ending February 22 jumped to 242,000, an increase of 22,000 from the previous week’s revised level, the U.S. Labor Department reported on Thursday. 

Meanwhile, the second estimate of U.S. Gross Domestic Product (GDP) showed the economy growing by 2.3% in the final quarter of 2024, as announced by the Bureau of Economic Analysis. The data remained unchanged from the first estimate and was in line with economists’ expectations.

However, the report also indicated rising inflationary pressures. The preliminary GDP Price Index rose 2.4%, up from the initial estimate of 2.2%. Economists had expected an unchanged reading.

At the same time, core PCE for the quarter, which excludes food and energy prices, increased 2.7%, exceeding economists’ expectations of a 2.5% rise. Additionally, U.S. initial jobless claims rose to 224,000 for the week ending February 21, signaling slight weakness in the labor market.

U.S. consumers have been increasingly worried about Donald Trump’s proposed tariff plans, which could potentially drive-up domestic prices. The University of Michigan Consumer Sentiment Index fell to 64.7 in February, a nearly 10% decline—sharper than expected—as consumers expressed concerns about higher inflation due to potential new tariffs.

The five-year inflation outlook in the survey stood at 3.5%, the highest since 1995. In a fresh blow, Trump announced on Thursday that his proposed tariffs on Mexico and Canada will take effect on March 4.

Trump claimed that the two countries had not done enough to curb the flow of drugs across the border. He also stated that China, which already faces 10% tariffs from the U.S., would be hit with an additional 10% levy.

Trump’s unveiling of additional tariffs on Chinese imports raises the risk of Beijing retaliating, escalating tensions between the world’s two largest economies. He also threatened to impose a 25% tariff on imports from the European Union.

The U.S. Federal Reserve has also taken note of Trump’s trade actions, which prompted it to pause its rate-cut cycle in January. Amid growing trade tensions, Morgan Stanley recently revised its outlook, now predicting just one 25-basis-point rate cut in 2025.

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