Indian IT stocks maintained an upward trajectory for the third consecutive session on Thursday, September 18, fueled by investor optimism after the US Federal Reserve announced its first rate cut of the year. The move is seen as a counter to the weakness in the US labor market. The rate change improved investor sentiment and led to fresh buying across the technology pack.
The Nifty IT index advanced over 3% across the three-day rally, with most heavyweights trading in the green. On Thursday, LTIMindtree emerged as the top performer, surging 3.60% to Rs 5,619 intraday.
Infosys gained 1.46%, closing at Rs 1,545. The stock advanced steadily through the session, supported by stronger sentiment in the IT index after the Fed’s rate cut.
Wipro rose 1.55% to settle at Rs 258.20. This gaining streak becomes the third consecutive day of gains, with buying interest driven by hopes of improved demand from US clients..
Mphasis, Coforge, and HCL Tech advanced by around 1% each. Others, including Tata Consultancy Services (TCS), Tech Mahindra, Oracle Financial Services Software (OFSS), and Persistent Systems, also posted small gains.
The positive trend in IT counters is closely associated with global monetary signals. The US Federal Reserve lowered its benchmark interest rate by 25 basis points to ease indications of stress in the US labor market.
Low US interest rates are usually positive for emerging markets such as India by increasing foreign portfolio inflows.
More importantly, for Indian IT firms, which generate a large portion of their revenues from North America. A rate cut often leads to higher discretionary spending for US corporates. This could lead to an increase in demand for outsourcing and digital transformation services.
However, Powell referred to the cut as a “risk-management” measure, emphasizing that the central bank is not in a rush to implement aggressive easing. This moderated some of the market’s initial enthusiasm.
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Despite the short-term rally, analysts remain cautious on the sector’s medium-term prospects. According to Harshal Dasani, Business Head at INVAsset PMS, the bounce in IT stocks appears more sentiment-driven than structural.
“The sector has faced consistent headwinds in its key markets of the US and Europe, where clients have curtailed discretionary tech spending. Revenue growth has been muted, and deal flows remain subdued,” he noted.
Dasani highlighted stagflationary risks in the US and geopolitical uncertainties in Europe, particularly the possibility of heightened conflict with Russia, as key dampeners to IT spending.
While IT stocks may see positive momentum in the short term, due to interest rate cuts, a weaker dollar, and renewed foreign interest, longer-term challenges facing the sector remain. Analysts believe that investors should distinguish between firms based on their robust deal pipelines and resilient clients, as headwinds facing the sector are not likely to dissipate quickly.