IT stocks jumped up to 3% in intraday deals on Thursday, September 18, pushing the Nifty IT index higher for the third day, after a rate cut by the US Federal Reserve overnight boosted investor sentiment. During the three-day rally, the Nifty IT pack has jumped over 3%.
In trade today, LTIMindtree shares emerged as the top index gainer, rising as much as 3.61% to the day's peak of ₹5,619. It was followed by Infosys and Wipro, rising 2% each to the day's high of ₹1,555 and ₹259.80, respectively.
Mphasis, Coforge, and HCL Tech added 1% each. Meanwhile, other IT stocks like TCS, Tech Mahindra, OFSS and Persistent Systems also traded in the green.
The rally comes amid a 25 basis point rate cut by the US Fed for the first time this year in order to address the weakness emerging in the labour market.
However, Fed chairman Jerome Powell tempered the expectations of a more aggressive easing as he said that last night's move was a risk-management cut and that the central bank does not need to move quickly on rates.
A lower US interest rate makes emerging markets like India attractive for foreign portfolio investors. Meanwhile, it also drives an increase in the discretionary spending limit in the US, which is beneficial for IT companies, as they earn a major chunk of their revenue from the US.
While the IT pack has seen renewed interest from investors, Harshal Dasani, Business Head at INVAsset PMS, believes the bounce may be short-lived.
The Fed’s 25 bps rate cut has sparked a sharp bounce in Nifty IT, driven by hopes of a demand revival, but this is more sentiment-driven than structural, he opined.
“The IT sector has struggled over the past few years, weighed down by a persistent slowdown in its key markets — the US and Europe. With clients in these geographies tightening discretionary tech spending, Indian IT firms have seen muted revenue growth and weaker deal flows. The reality remains challenging. The US economy is showing stagflationary trends, with growth cooling even as inflationary pressures linger, limiting the scope for a robust rebound in technology spending. In Europe, the outlook is clouded further by geopolitical risks, including the possibility of deeper conflict with Russia — a factor that keeps corporates cautious on capex,” he added.
Thus, while IT stocks may enjoy a short-term lift from easing rates and currency tailwinds, the medium-term trajectory looks difficult, believes Dasani, adding that investors will need to be selective, as sector headwinds are far from over.
Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
