With just a few days left for the US presidential election and the latest opinion polls showing a narrowing of gap between the Donald Trump and Hillary Clinton, stocks of domestic IT companies have started feeling the pressure the most.
Anxious investors have started trimming their exposure to the IT sector dragging down the stocks of Infosys, Wipro and Mindtree to their 52-week low on Thursday.
“A Trump victory would be a big negative for the domestic IT sector,” said Ravi Sundar Muthukrishnan, co-head-research at ICICI Securities.
“The sector, which generates a significant portion of their revenue from the US is already going through pain with companies in the developed markets cutting down their discretionary spending. Over and above that Mr Trump’s call for stricter immigration laws and his strong stand against outsourcing of jobs have created nervousness in the market,” he added.
While the shares of Infosys hit a fresh 52-week low of Rs 965.10 before closing the day at Rs 966.90, the shares of Wipro and Mindtree hit a low of Rs 446.15 and Rs 425 respectively. The weakness in major IT stocks also pulled down the BSE IT index to its 52-week low.
Mr Trump has made outsourcing and liberal immigration laws a major campaign issue in this election. Pledging to protect American jobs, the Republican nominee in one of his election speech had said, “Many mothers across this country are worried their kids won’t find jobs, and they are right to be worried. One of the biggest threats is outsourcing — jobs for college-educated kids are being sent to other countries. At the same time, companies are importing low-wage workers on H-1B visas to take jobs from young college-trained Americans”.
“Some damage will be there. But how much that damage will be, we can’t quantify it right now,” observed Sarabjit Kaur Nangra, vice-president, research at Angel Broking.
According to her, IT firms profit margins are expected to come under pressure if Mr Trump tightens immigration laws and take harsh measures to discourage outsourcing. “IT firms had reported subdued numbers this year and have also lowered their revenue guidance. However, investors are under the hope that the sector would fare better next year,” she said.
