Indian IT Stocks Rally After Fed Chair Powell’s Growth Reassurance and 2025 Rate Cut Outlook

Indian IT stocks, including industry heavyweights Infosys, Tata Consultancy Services (TCS), and Tech Mahindra, witnessed a notable surge in their share prices on March 20. This upward movement was driven by comments from US Federal Reserve Chair Jerome Powell, who signalled that the US central bank remains committed to growth and maintains its outlook for two rate cuts in 2025, despite rising inflation concerns linked to former President Donald Trump’s new tariff proposals.

Fed’s Assurance on Growth Sparks Investor Optimism

In a press interaction, Jerome Powell downplayed immediate fears of economic slowdown or inflation escalation stemming from Trump’s threats of reciprocal tariffs on major trade partners. Powell's tone was seen as dovish, which gave a boost to investor sentiment, particularly in the IT sector, where companies have substantial business ties with the United States, especially in exports and consultancy services.

Powell's reassurance came at a crucial time, as investors were wary of potential disruptions from geopolitical uncertainties and fiscal tightening. The US Fed’s confirmation of maintaining two rate cuts in 2025, and possibly more in 2026, acted as a catalyst for market gains across global indices, including India’s Nifty IT index, which rose 1.3 percent to reach 36,699, marking the highest level in the last five sessions.

Indian IT Stocks Mirror Gains in US Markets

The rally in Indian IT stocks followed similar gains in the US markets, where major indices such as the S&P 500 rose by 1.1% and the Nasdaq 100 gained 1.3%. This global momentum reflected positively on Indian tech giants, as they leveraged their strong US market presence to ride the optimistic wave.

According to Ankita Pathak of Angel One, the Fed’s outlook is aligned with market expectations, projecting two rate cuts in 2025 and two more in 2026. This dovish stance led to gold touching a new high, a 4 basis point drop in 10-year bond yields, and an upswing in equity markets, benefiting IT stocks the most.

Stagflation Risks Flagged but Growth Outlook Remains Positive

Akshay Chinchalkar, Head of Research at Axis Securities, noted that while the Federal Open Market Committee (FOMC) members recognised the risk of stagflation—a scenario of slow growth combined with high inflation—the anticipated rate cuts reflect the Fed’s commitment to cushioning the economy. However, Chinchalkar warned that expectations of more aggressive rate cuts may not be grounded, given the uncertainty surrounding Trump’s tariff plans, which Powell highlighted as a potential risk factor.

Stock-wise Performance: Mphasis, TCS, Infosys Lead the Pack

Among the top gainers on the Nifty IT index, Mphasis shares rose over 2 percent, trading at Rs 2,332 apiece, showing recovery after hitting a 52-week low of Rs 2,170.25 earlier in March. TCS shares surged nearly 2 percent to around Rs 3,560 per share, while HCL Tech recorded a 1.7 percent rise, trading at Rs 1,571 apiece.

Infosys, a heavyweight in the IT sector, also posted significant gains, with a 1.5 percent rise in share price to Rs 1,610. Other major IT players like Tech Mahindra, Wipro, Coforge, and LTI Mindtree also saw positive trading activity, contributing to the overall upliftment of the IT index.

Fed’s Balanced View Supports Global Markets

The US Federal Reserve’s statement acknowledged increased uncertainty in recent weeks, especially due to inflationary pressures and potential policy shifts in trade and tariffs. However, the Fed also observed that the current unemployment rate of 4.1 percent suggests the job market remains balanced, further easing concerns of overheating or underperformance in the economy.

This balanced perspective reassured global markets, especially export-driven sectors like IT, which are highly sensitive to changes in US economic policies. The Fed’s commitment to measured rate cuts has provided a window of stability for businesses reliant on the US market, especially India’s IT sector, which contributes significantly to software services exports and consultancy projects in North America.

Indian Markets to Remain Watchful

While the immediate reaction to Powell’s comments was positive, analysts suggest that investors should remain cautious given the volatile nature of global trade dynamics, especially if Trump’s tariff policies gain momentum ahead of upcoming elections. Indian IT companies, due to their heavy reliance on the US, will need to navigate these policy changes carefully, while also leveraging growth opportunities from any economic stimulus that may arise due to rate cuts.

Conclusion

The surge in Infosys, TCS, and other IT shares underscores the sensitive interplay between US monetary policy and Indian market performance. As the Fed stays the course on growth and rate cuts, Indian IT stocks are likely to benefit in the near term, but geopolitical developments, particularly related to US trade policies, will be crucial in shaping the long-term outlook.

For now, market participants remain optimistic, with the IT sector poised for gains, riding on favourable policy signals from the US Fed and strong recovery momentum in both domestic and international markets.

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