IT Stocks Fall Up to 4% Ahead of Fed Meeting Despite Rate-Cut Expectations; Nifty IT Slips Over 1%

Indian IT stocks came under heavy selling pressure on December 9 as investors turned increasingly cautious ahead of the US Federal Reserve’s FOMC meeting. Despite expectations of a possible rate cut, market sentiment remained weak, pulling the Nifty IT index down more than 1.2% to 38,115 by 11:50 am. This marked the sector’s second consecutive day of losses.

The decline reflects both global macro uncertainty and persistent concerns about slowing technology spending by international clients, affecting the revenue visibility of Indian IT service providers.

IT Stocks Tumble Ahead of Fed Event Risk

The US Federal Reserve began its two-day Federal Open Market Committee (FOMC) meeting on December 9, with the policy outcome scheduled for December 10. Analysts expect the Fed to announce a 25-basis-point rate cut, but with a “hawkish” stance, implying limited further cuts in the near term.

The caution stems not from the expected cut itself, but from the possibility that the Fed may signal a higher threshold for future easing, which could tighten liquidity conditions globally and impact capital flows into emerging markets like India.

Ajit Mishra, SVP – Research at Religare Broking, noted that investor sentiment weakened ahead of the Fed meeting, primarily due to fears of a tighter global monetary stance. He added that markets are concerned about the spillover impact such a stance could have on emerging markets, including India.

This uncertainty pushed traders to trim exposure to sensitive sectors such as IT, which derive a significant share of their revenue from the US.

Nifty IT Index Slides; Sector Continues to Underperform

The weakness in frontline IT stocks dragged the broader Nifty IT index deeper into the red. By late morning, the index had fallen more than 1.2%, sliding to 38,115.

This decline extends the selling pressure seen earlier, making it the second straight session where IT stocks have weighed heavily on overall market sentiment.

The drop also reflects the sector’s broader challenges, including slow deal conversions, reduced discretionary spending, and continued foreign investor pessimism.

Also Read: DGCA Cuts IndiGo’s Flight Schedule by 5% After Major Operational Crisis; Revised Plan Due by Dec 10

Why Global Factors Are Hurting Indian IT

The IT sector, which depends heavily on the US and European markets, has been struggling for several quarters.

According to Siddharth Maurya, Founder & Managing Director of Vibhavangal Anukulakara, the industry has suffered due to:

• Reduced spending by international clients on non-essential services

• Slim deal pipelines

• Foreign investors are exiting amid macroeconomic uncertainty

Maurya added that although automation and artificial intelligence are reshaping the IT industry, there remains a level of doubt among investors until clients confirm fresh outsourcing deals.

However, he also noted that market valuations have already priced in much of the negativity. Dividend yields are currently attractive, which could make the sector appealing for long-term, contrarian investors who can handle volatility over the next 12–18 months.

Top IT Losers: Coforge Drops Nearly 4%

Among Nifty IT stocks, Coforge emerged as the biggest loser. Shares of the company fell nearly 4%, trading at ₹1,873.90 apiece. The stock’s sharp decline contributed significantly to the sectoral index’s weakness.

Other major IT stocks also ended lower:

• Tata Consultancy Services (TCS): Down over 1%

• HCL Technologies: Down over 1%

• Wipro: Down over 1%

• Infosys: Down over 1%

• Tech Mahindra: Down nearly 1%

• LTIMindtree: Down nearly 1%

• Persistent Systems: Down nearly 1%

With most IT heavyweights in the red, the sector turned out to be the top sectoral loser for the day.

Why Investors Are Nervous Despite a Possible Rate Cut

While a rate cut is generally supportive for risk assets, the nervousness in markets stems from expectations of a hawkish communication from the Fed. Analysts believe:

• The Fed’s language

• The median forecast of policymakers

• Chair Jerome Powell’s press conference

…could all indicate limited room for additional cuts in the near term.

Such an outcome could lead to:

• Stronger US dollar

• Outflows from emerging markets

• Volatile equity markets globally

Given that IT companies earn a substantial portion of revenues from the US, any hint of prolonged global tightening impacts their earnings outlook and stock sentiment.

Sector Outlook Remains Challenged but Potentially Attractive for Long-Term Investors

Despite the near-term pressure, some analysts believe that the sector could see value buying if valuations turn more attractive.

Maurya said that while automation and AI continue to drive long-term transformation, the sector will likely remain under pressure until there is clarity on new outsourcing deals and client spending stabilizes.

However, with most negatives already priced in, the sector could present opportunities for “long-term, contrarian investors” willing to withstand volatility for 12–18 months.

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