The Indian information technology (IT) sector witnessed strong momentum on September 18, with stocks of leading IT firms rising sharply after the United States Federal Reserve announced an interest rate cut. The Nifty IT index climbed 1.5 per cent in the morning trade to touch 37,006, marking its third consecutive session of gains. The surge pushed the IT index to the top spot among sectoral gainers on the market, reflecting positive investor sentiment towards the sector.

Shares of companies such as Infosys, LTIMindtree, Wipro, Mphasis, HCL Technologies, Tech Mahindra, Coforge, Tata Consultancy Services (TCS), and Persistent Systems all traded in the green, contributing to the overall rally in the IT space.

US Federal Reserve Cuts Rates by 25 Basis Points

On September 17, the US Federal Reserve slashed its benchmark interest rate by 25 basis points, lowering the target range to 4–4.25 per cent. This was the first rate cut announced by the American central bank since December 2024 and came in line with market expectations.

Significantly, this was also the first rate cut during Donald Trump’s second term as the President of the United States. Policymakers at the Fed further indicated that more rate cuts could follow, signalling a softer monetary stance going ahead.

According to projections, officials foresee two more quarter-point cuts (50 basis points in total) by the end of the year. Additionally, one cut is expected in 2026 and another in 2027. Interestingly, one official projected as much as 125 basis points of easing by December, suggesting diverging opinions within the policy-making committee about the scale of monetary easing required.

Also Read: Global Health Stock Sees Modest Gains Amid Strong Trading Activity

Fed’s Economic Assessment

The US central bank noted that economic growth in the first half of the year showed signs of moderation. Indicators reflected a slowdown in job gains, with the unemployment rate edging higher, although it remains low by historical standards. Inflation, meanwhile, has moved up and continues to remain somewhat elevated.

In its policy statement, the Federal Reserve highlighted that “downside risks to employment have risen,” prompting the shift in monetary stance. The commentary underlined a cautious outlook towards the balance between inflation and employment growth.

Powell Calls It a “Risk Management Cut”

At the post-policy press conference, US Fed Chair Jerome Powell described the quarter-point rate cut as a “risk management cut.” He explained that the labour market has softened, with the recent pace of job creation appearing to fall below the breakeven level required to hold the unemployment rate constant.

Powell emphasised, “The labour market is softening and we don’t need it to soften anymore (and) don’t want it to.” His remarks reflected the Fed’s intent to support employment stability while ensuring inflation does not spiral out of control.

Why IT Stocks Reacted Positively

Indian IT companies derive a significant portion of their revenues from North America, making them highly sensitive to economic and monetary policy changes in the United States. A rate cut in the US is expected to increase discretionary spending, which directly benefits technology outsourcing and digital transformation contracts handled by Indian firms.

The market’s positive reaction was visible in the performance of major IT stocks. LTIMindtree emerged as the top gainer, jumping nearly 3 per cent to trade at Rs 5,573 apiece. Shares of Infosys, Wipro, and Mphasis surged close to 2 per cent each. Persistent Systems, HCL Technologies, Coforge, and Tech Mahindra gained more than 1 per cent. Tata Consultancy Services (TCS), the largest IT company in India by market capitalisation, also traded higher by nearly 1 per cent.

The rally reinforced the strong correlation between US monetary policy and the Indian IT sector, as investors priced in the potential for stronger order inflows and improved client budgets.

Analysts’ Views on the Fed’s Move

Market experts observed that while the rate cut was widely anticipated, the Fed’s internal divisions and Powell’s commentary held more significance for the financial markets.

Ross Maxwell, Global Strategy Lead at VT Markets, explained, “The Fed continues to face a delicate balancing act following a 0.25 per cent rate cut at its latest meeting in September. Whilst the rate cut was expected, it is of more note to listen to what Fed Chair Jerome Powell said in the Press Conference afterwards, where he mentioned that policy decisions remain challenging. The committee members are still split on further rate cuts, with 10 out of 19 policymakers seeing two or more rate cuts this year.”

Maxwell further highlighted the implications for financial markets, saying, “Financial markets are likely to welcome the rate cut in the near term, as lower borrowing costs ease pressure on households and businesses. Equity markets may see short-term support, though bond yields could remain volatile as investors weigh growth concerns against inflation risks.”

Broader Market Implications

The positive sentiment surrounding IT stocks also contributed to an improvement in overall investor confidence. With the Nifty IT index outperforming other sectors, market participants viewed the rate cut as a sign of relief for global equity markets, particularly those dependent on US client spending.

The combination of monetary easing, projected future cuts, and supportive commentary from Powell is expected to shape investor strategies in the near term. IT stocks, given their high dependence on the North American market, are positioned to remain in focus as global growth and inflation trends unfold.

Key Highlights

The Nifty IT index rose 1.5% to 37,006 on September 18, marking its third consecutive session of gains.
US Federal Reserve cut rates by 25 bps to 4–4.25%, its first cut since December 2024.
Fed officials hinted at two more quarter-point cuts this year, with additional cuts in 2026 and 2027.
Jerome Powell termed the move a “risk management cut,” citing a softening labour market.
LTIMindtree shares surged nearly 3% to Rs 5,573; Infosys, Wipro, and Mphasis gained around 2%.
HCL Tech, Coforge, Tech Mahindra, Persistent Systems, and TCS also posted gains.
Analysts highlighted divisions within the Fed, with 10 out of 19 policymakers expecting two or more cuts this year.
Experts expect near-term support for equity markets, though bond yields may remain volatile.