Infosys, LTIMindtree, Wipro, other IT stocks rise up to 3% after 25 bps Fed rate cut

US Fed cut rate by 25 basis points

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The shares of Indian IT companies jumped on September 18 after the US Federal Reserve cut its interest rate for the first time since December 2024. The sharp rise in the share prices pushed the Nifty IT index higher to emerge as the top sectoral gainer on the market today.

The Nifty IT index rose 1.5 percent in the morning to 37,006, extending gains for the third consecutive session.

US Fed cuts rates by 25 bps:

The US Federal Reserve on September 17 slashed its benchmark interest rate by 25 basis points to 4-4.25 percent, in line with analyst expectations. Notably, this marked the first rate cut announced by the American central bank since Donald Trump began his second term as the President of the United States.

More rate cuts on the way?

Policymakers hinted at two more quarter-point cuts this year (50 bps in total), plus one cut in 2026 and another in 2027. One official projected a whopping 125 bps of easing by December.

In its statement, the US Fed said "recent indicators suggest that growth of economic activity moderated in the first half of the year. Job gains have slowed, and the unemployment rate has edged up but remains low. Inflation has moved up and remains somewhat elevated." It added that "downside risks to employment have risen", prompting the shift in policy.

'A risk management cut'

During the press conference, US Fed Chair Jerome Powell called the quarter-point rate cut a "risk management cut", highlighting that the labour market has softened and "the recent pace of job creation appears to be running below the breakeven rate needed to hold the unemployment rate constant." He added, "The labour market is softening and we don’t need it to soften anymore (and) don't want it to."

Why IT stocks surge after Fed's rate cut:

A rate cut in the US is expected to increase the discretionary spending limit, which in turn benefits IT companies which derive a significant portion of their revenue from the North American market.

LTIMindtree shares jumped nearly 3 percent to trade at Rs 5,573 apiece. Infosys, Wipro and Mphasis shares surged nearly 2 percent each. Persistent Systems, HCL Tech, Coforge and Tech Mahindra shares gained more than 1 percent each. Tata Consultancy Services (TCS) shares were up nearly 1 percent.

What analysts say?

"The FED continues to face a delicate balancing act following a 0.25% 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, and the committee members are still split on further rate cuts, with 10 out of 19 policy makers seeing two or more rate cuts this year," said Ross Maxwell, Global Strategy Lead at VT Markets.

"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," he added.

Also read: Our LIVE blog on stock market updates

Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.