Infosys, the Indian IT giant, saw its shares decline by 1.6% to Rs 1,501.40 on Monday, as investors moved to book profits following last week's substantial rally in IT stocks. This pullback comes in the wake of Infosys' announcement of its largest-ever share buyback program, which had previously fueled a sector-wide surge.

IT Sector Retreat

The broader IT sector also felt the impact of the profit-taking sentiment:

• The Nifty IT index fell by 1%, emerging as the primary drag on benchmark indices.
• Other major IT players experienced declines:
  • Tata Consultancy Services (TCS) dropped 1%
  • Persistent Systems, HCL Technologies, Coforge, Tech Mahindra, and Wipro saw declines ranging from 0.7% to 1%

This sector-wide retreat follows a robust 4.3% rally in IT stocks last week, highlighting the volatile nature of market sentiment.

Infosys Buyback Program

The recent rally was primarily driven by Infosys' announcement on September 12 of a record-breaking share repurchase program:

This ambitious buyback plan aligns with Infosys' strategy to return 85% of free cash flow to shareholders over the fiscal years 2025 to 2029.

Market Impact

The announcement had a significant impact on Infosys' market valuation:

• Last week's gains added Rs 33,736.83 crore to Infosys' market capitalization
• The company's total market cap reached Rs 6.33 lakh crore

Market Outlook

While the IT sector faces a short-term pullback, market participants are also turning their attention to broader economic factors:

• Increased caution ahead of the U.S. Federal Reserve's upcoming policy meeting
• Investors are likely to closely monitor global cues and their potential impact on the IT sector, which derives a significant portion of its revenue from international markets

As the market digests the recent buyback news and awaits further economic indicators, the IT sector may continue to experience some volatility in the near term.

The Indian IT sector experienced a significant boost as the Nifty IT index surged 2.6%, driven by a combination of positive factors including improved US-India trade relations and expectations of a US Federal Reserve rate cut.

Trump's Trade Negotiations Boost Sentiment

Concerns over potential software export tariffs eased after Donald Trump indicated that the United States and India were nearing a successful conclusion in trade negotiations. This development has helped alleviate worries in the IT sector, which had been under pressure due to proposed legislation like the HIRE Act.

Federal Reserve Rate Cut Expectations

Adding to the positive sentiment, expectations of a US Federal Reserve rate cut further supported the rally in IT stocks. This potential monetary policy shift is seen as favorable for the sector.

Infosys Share Buyback Consideration

Infosys, one of India's leading IT services companies, announced that its board would consider a share buyback. This news generated optimism among investors, with analysts expecting a potential premium of around 25% at ₹1,800-1,900 levels. The move by Infosys could potentially encourage similar actions from other IT majors.

Stock Performance

The rally saw widespread gains across the IT sector:

Market Context

The rally comes as a welcome relief for the IT sector, which had been facing challenges. Major IT companies had seen declines of 15-28% in their stock prices. The proposed HIRE Act, which would impose a 25% tax on US companies outsourcing work abroad, had been a source of concern for the industry.

As trade negotiations progress and the possibility of more favorable monetary policy looms, the IT sector appears to be regaining investor confidence. However, market participants will likely continue to monitor developments in US-India trade relations and Federal Reserve decisions for further cues.