IT Stocks Drop Up to 4% Despite Fed Rate-Cut Hopes — What’s Behind the Decline

Indian IT Stocks Tumble Ahead of Fed Meeting as Market Braces for Hawkish Signals

Indian IT stocks declined sharply on December 9 as cautious global sentiment ahead of the US Federal Reserve’s FOMC meeting weighed on technology shares. Despite expectations of a Fed rate cut, equity markets remained jittery, with analysts warning that the central bank may adopt a hawkish tone, limiting the possibility of further monetary easing in the near term.

IT Sector Slides as Investors Turn Risk-Averse Before Fed Decision

Shares of leading Indian IT companies—including Coforge, TCS, HCLTech, Wipro, Infosys, and Tech Mahindra—fell between 1 percent and 4 percent during the day. The selloff dragged the Nifty IT index down by over 1.2% to 38,115, marking its second consecutive session of losses.

The pressure on the IT stocks comes at a time when global risk sentiment is fragile. Investors remain cautious ahead of Wednesday’s FOMC announcement, which is widely expected to include a 25-basis-point rate cut. However, analysts fear that the accompanying commentary could signal more restrictive policy conditions, offsetting the positive impact of the rate reduction.

Ajit Mishra, SVP of Research at Religare Broking, noted that market psychology has deteriorated ahead of the policy event. “Sentiment weakened primarily due to rising caution ahead of the upcoming Fed meeting, with investors worried about the possibility of a tighter global monetary stance and its spillover impact on emerging markets,” he said.

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Why Fed Commentary Matters for Indian IT Stocks

Indian IT companies generate a significant share of their revenue from the US market. As a result, Fed decisions directly influence client spending, outsourcing budgets, and overall demand visibility. While investors have been hoping that rate cuts would revive discretionary IT spending, analysts caution that a hawkish cut—a reduction in rates paired with restrictive forward guidance—may keep global clients cautious.

Economists expect Fed Chair Jerome Powell to emphasize inflation risks and maintain a conservative outlook on future cuts. This uncertainty has led to profit-booking across several IT counters that had recently seen strong inflows.

Weak Global Technology Spending Adds to Pressure

Beyond macro headwinds, the Indian IT industry is grappling with persistent sectoral challenges. International clients, especially in the US and Europe, have reduced discretionary spending, leading to slower deal pipelines and prolonged decision cycles.

According to Siddharth Maurya, Founder & Managing Director of Vibhavangal Anukulakara, the industry’s challenges run deeper than short-term volatility. He explained:
“The Indian IT industry has suffered a blow lately after international customers reduced their spending on non-essential activities. Deal pipelines have become very slim and foreign investors, being apprehensive about macro risks, are still selling.”

Maurya added that while automation and AI adoption could reshape the sector positively over time, the near-term cloud of uncertainty will persist until clients confirm new outsourcing mandates. Still, he believes the sharp correction may create opportunities for patient, long-term investors.
“Market prices have already factored in most of the negative scenario. Dividend returns are appealing, and this could turn into a value investment situation for contrarian investors willing to tolerate volatility over the next 12–18 months,” he said.

Coforge Leads the Decline as Nifty IT Turns Top Sectoral Loser

Among individual stocks, Coforge emerged as the top laggard of the session. The stock dropped nearly 4% to ₹1,873.90, extending its recent weakness amid concerns over slowing US demand.

Other heavyweight IT stocks also saw sustained selling pressure:

• TCS, HCLTech, Infosys, Wipro each fell more than 1%

• Tech Mahindra, LTIMindtree, Persistent Systems declined close to 1%

• Broad-based weakness dragged the sectoral index lower, making it the day’s worst performer

The correction reflects investors’ reluctance to take aggressive positions ahead of the Fed’s announcement, especially in sectors sensitive to US macroeconomic signals.

Market Outlook: Volatility Likely to Persist Until Clarity Emerges

With IT companies navigating margin pressure, delayed deal cycles, and global monetary uncertainty, analysts expect continued volatility in the sector. The commentary from the Fed will play a crucial role in shaping expectations for client budgets in the first half of 2025.

A clearly dovish stance could revive optimism, while a more conservative tone may extend the downturn in Indian IT stocks. For now, the industry remains in a holding pattern, waiting for evidence of strong demand recovery.

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