IT stocks: As the Indian stock market regained some of its lost ground from Friday’s sell-off, technology stocks led the charge, with the Nifty IT index climbing nearly 3% to a one-month high of 36,406. The rally built on last week’s gains after U.S. Federal Reserve Chair Jerome Powell hinted at an interest rate cut in the coming months.
All 10 constituents of the index were trading in the green, with Mphasis leading the pack, advancing 4.17% to ₹2,967 apiece, followed by Infosys and TCS, which gained over 3% to ₹1,534 and ₹3,145, respectively.
Other information technology (IT) stocks, including Oracle Financial Services, Wipro, HCL Technologies, Persistent Systems, LTIMindtree, Tech Mahindra, and Coforge, gained between 1.6% and 3%.
Powell opens door to potential rate cuts
At the Fed’s annual conclave in Wyoming, Powell said in his measured remarks that while U.S. unemployment remains low, “with policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance.”
However, while the Fed chief left the door open for rate cuts, he did not indicate the timing of such a move, suggesting the central bank will proceed cautiously as it continues to assess the impact of tariffs and other policies on the economy.
Markets are now pricing in an 87% probability of a 25 basis point rate cut in September, up from about 75% last week. The Fed held rates steady for the fifth consecutive meeting in July, despite continued pressure from the White House, as the central bank adopted a wait-and-watch approach to see the full impact of the Trump tariffs on prices.
Powell said that a year ago the Fed’s restrictive policy had helped bring inflation closer to its target and cooled an overheated labor market, though unemployment had risen. Since then, the central bank has adjusted its stance to keep the labor market near maximum employment.
He noted that the economy now faces fresh challenges, including higher global tariffs, tighter immigration that has slowed labor force growth, and uncertainty around tax, spending, and regulatory policies, all of which could have lasting effects on growth and productivity.
Trade tensions cloud IT outlook
The Fed rate cut could revive technology spending, leading to an increase in deal flows for Indian companies, but trade relations between the U.S. and India are weakening as negotiations between the two nations remain stuck.
The additional 25% tariffs imposed on India for buying Russian oil are likely to take effect from August 27, following the first round of 25% tariffs that came into force on August 07.
Meanwhile, lackluster earnings and a weak demand outlook have spooked overseas sentiment, with foreign investors offloading $2.27 billion worth of Indian IT stocks in July, their highest sectoral exit since March 2022, data from the National Securities Depository shows.
The sharp selling has made the Nifty IT index the worst-performing sectoral index so far in 2025. Although there has been some recovery in tech stocks, the index remains 16% lower.
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