Technology shares suffered a steep blow on Monday largely driven by the United States Presidents message that new tariffs might be imposed. Fears of a worldwide economic downturn have probably deepened which eventually led to a stock market panic. The Nifty IT index plunged over 7% which was one of the steepest drops in recent years amidst global market turmoil.
Speaking of the trends during early hours, most of the IT sector business saw deep downfalls. For example, Coforge was down by 9%, while Mphasis and Persistent Systems plunged more than 6%. Not only small and mid-cap were affected, but also major companies like Infosys and Tech Mahindra saw huge dips as large numbers of shareholders tried to sell their stocks.
The tension in the US-China trade relations has been a crucial factor leading to wild movements in the market. The Chinese government has also hit back at the American government by issuing a retaliatory tariff policy, which had an adverse effect on the supply chains and had a negative impact on the technology products, demand on supply affected globally.
The Nasdaq Composite went down by 5.8% last Friday signifying the serious hit that the technology companies with heavy dealings in China took. Analysts are worried that the trade disputes that are expected to last longer could create even tougher times for the IT firms that depend on their foreign businesses.
Federal Reserve Chair Jerome Powell, while speaking last week, highlighted several economic risks related to the tariffs that Donald Trump had imposed on the US. In his speech, some of the risks that he mentioned were amplified inflation and slower economic growth caused by those policies.
The Monday morning trading in Asia followed the Wall Street downtrend. The Nikkei of Japan, the first case in point, crashed 6% in value, which led to circuit breakers being activated, while the Kospi of South Korea was not far behind with a 5% drop. These cases give evidence of the interwoven relations among the world’s financial systems during times of emergency.
Investors are now moving their focus to safer assets as the geopolitical tensions increased. Gold prices plummeted last Friday after traders decided to sell holdings to offset losses in stocks, while the prices of crude oil continued on their downward path due to deepening recession fears.
The uncertainty that accompanies the negotiations of the tariffs is a big problem for the businesses that have to deal with the effects of the supply chain disruptions and the rise in costs. It is the technology companies that are mostly affected due to the international trade and manufacturing relationships they have formed.
Worldwide financial experts predict the likelihood that India in the run-up of tariff war will probably be least affected due to the limited impact of its exports on the US economy. However, Indian IT companies with a considerable number of operations abroad and that are very dependent on the global market may still encounter difficulties if global demand slumps further.
Company announcements about their profits, which are scheduled for this week, will be the eye of all industry experts as they will be looking for signs of the tech industry’s strength. The way in which the businesses navigate through this hard period is what the investors are most interested in at the moment since they are the ones who will be able to safeguard their profit levels.
While trade tensions are on the rise, business executives are making appeals in the corridors of power for goodwill-friendly strategies that will be instrumental in reducing the falling off of the economy. The next few weeks are crucial in terms of the potential ability of the global markets to regain stability or if there are still any further challenges to come which the investors will have to confront and suffer.
