IT stocks decline as expectations fade for US Fed rate cut in December

Shares of Indian IT companies fell sharply on 14 November as growing expectations that the US Federal Reserve may keep interest rates unchanged at its December policy meeting dampened investor sentiment. The Nifty IT index dropped more than 1 per cent in early trade to 36,294, making it the worst-performing sector for the second consecutive session.

A shift in tone from several Federal Reserve officials has weakened market expectations of a rate cut next month. San Francisco Fed President Mary Daly, previously seen as a strong advocate for further easing, said it was “premature” to form a firm view nearly a month before the meeting. Speaking in Dublin, she noted: “I have an open mind, but I have not made a final decision.”

Minneapolis Fed President Neel Kashkari told Bloomberg News he had opposed last month’s rate cut due to the economy’s resilience and remains undecided about December. Inflation, he said, was still running “too high” at around 3 per cent.

Boston Fed President Susan Collins also signalled caution, saying she would be reluctant to support further easing without clear signs of deterioration in the labour market, especially given limited inflation data during the US government shutdown.

Market pricing now suggests a 47 per cent probability of a rate cut at the Federal Open Market Committee’s (FOMC) meeting concluding on 10 December, down from 67 per cent earlier in the week.

IT companies in India earn a substantial portion of their revenue from North America. Lower interest rates in the US typically boost discretionary spending by clients, supporting demand for technology services.

The fading likelihood of a cut has therefore weighed on share prices in the sector, echoing declines among US tech peers overnight.

Infosys led the slide, falling over 2 per cent to Rs 1,510.10. Mphasis also declined nearly 2 per cent, while Coforge dropped more than 1 per cent. Tech Mahindra and Wipro slipped close to 1 per cent each. Tata Consultancy Services (TCS), Persistent Systems, HCLTech and LTI Mindtree were also trading lower, though with marginal losses.

The sector remains sensitive to global macroeconomic signals, with investor sentiment turning cautious ahead of the Fed’s final policy decision of the year.