Indian IT Stocks Rally as US Fed Signals Rate Cuts in 2025

Infosys, TCS, and Other IT Shares Rally After Fed Chair Powell Eases Inflation Concerns

Shares of major Indian IT companies, including Infosys, Tata Consultancy Services (TCS), and Tech Mahindra, saw a strong rally on March 20 after US Federal Reserve Chair Jerome Powell reassured investors about growth prospects and maintained the projection of two rate cuts in 2025.

Despite rising inflation concerns driven by trade tariffs imposed by the Trump administration, Powell’s comments suggested that the Fed remains committed to rate cuts, which fueled optimism in global equity markets, particularly technology and IT services stocks.

IT Sector Leads Market Gains as Nifty IT Index Surges

• The Nifty IT index jumped 1.3% to 36,699, marking its highest level in the last five sessions.
• Indian IT stocks mirrored gains seen in US tech stocks, which surged after Powell’s statement.
• The positive sentiment boosted investor confidence, leading to broad-based gains across the IT sector.

Top Gainers in the IT Sector

• Mphasis: Emerged as the top gainer, surging over 2% to ₹2,332 per share. The stock has rebounded significantly after touching a 52-week low of ₹2,170.25 earlier in March.
• TCS (Tata Consultancy Services): Rose nearly 2% to ₹3,560 per share.
• HCL Technologies: Registered a 1.7% rise to ₹1,571 per share.
• Infosys: Climbed 1.5% to ₹1,610 per share, maintaining positive momentum.
• Tech Mahindra, Wipro, Coforge, and LTI Mindtree also posted gains, benefiting from improved market sentiment.

Factors Driving IT Stock Rally

1. US Federal Reserve Maintains Rate Cut Projection

• The US Federal Reserve reaffirmed its stance of two rate cuts in 2025, despite ongoing inflation concerns.
• Powell emphasized that while inflationary pressures persist due to trade tariffs, the long-term impact remains uncertain.
• The Fed’s dovish stance is seen as a positive trigger for IT companies, as lower interest rates typically boost corporate IT spending and outsourcing contracts.

2. US Market Rally Boosts Sentiment

• S&P 500 gained 1.1%, while the Nasdaq 100 surged 1.3%, signaling renewed investor confidence.
• The rally in US tech stocks translated into gains for Indian IT firms, which have significant exposure to the North American market.
• Indian IT companies derive over 50% of their revenue from the US, making them highly sensitive to Federal Reserve policies.

3. Decline in US Bond Yields and Weaker Dollar Outlook

• US 10-year bond yields fell by 4 basis points (bps), reflecting expectations of a looser monetary policy.
• A weaker dollar outlook following Powell’s speech supports Indian IT firms, as they earn in dollars but have rupee-denominated expenses, enhancing profitability.

Expert Views on the Market Trend

Ankita Pathak, Senior Research Analyst at Angel One

“The Fed’s stance remains largely in line with market expectations. Despite concerns over tariffs and inflation, Powell’s comments reaffirming rate cuts in 2025 have bolstered confidence in IT stocks. The expectation of continued policy support is fueling optimism in technology shares.”

Akshay Chinchalkar, Head of Research at Axis Securities

“The Fed acknowledged the possibility of stagflation—slow growth with persistent inflation—yet signaled its commitment to maintaining a balanced monetary policy. This has reassured markets, leading to gains in both global and Indian equities.”

Impact of Fed’s Decision on Indian IT Companies

Stronger Revenue Growth Outlook

• With the Fed signaling rate cuts, global companies may increase their IT budgets, leading to higher outsourcing demand for Indian IT firms.
• IT giants like TCS, Infosys, and HCL Tech could see an acceleration in deal wins, particularly from the US market, where clients may ramp up digital transformation initiatives.

Improved Valuations and Investor Sentiment

• The Indian IT sector has underperformed in recent months, largely due to fears of slowing global demand and rising wage costs.
• With the Fed reinforcing its commitment to rate cuts, analysts expect a re-rating of IT stocks, leading to stronger investor participation.

Challenges Ahead: Inflation and Tariff Uncertainty

• While Powell reassured markets, uncertainty around trade policies and inflation remains a key risk.
• US inflation continues to hover above the Fed’s 2% target, raising concerns over whether rate cuts will materialize as planned.
• Indian IT firms must navigate potential challenges from protectionist policies and rising operating costs.

The Indian IT Sector

• Despite macroeconomic uncertainties, the long-term demand for digital transformation, cloud computing, and AI-driven solutions remains strong.
• With the Fed maintaining a dovish stance, analysts believe IT stocks will continue to benefit from improved investor sentiment and a potential recovery in global technology spending.
• Brokerages remain positive on the sector, with buy recommendations for Infosys, TCS, and HCL Tech on expectations of strong earnings growth and higher deal closures in the coming quarters.