Shares of IT companies were higher on June 25 as market participants saw US Federal Reserve Chair Jerome Powell's testimony before Congressional committee as dovish, supportive of a rate cut in 2025.
The sharp rise in the share prices pushed Nifty IT index up nearly 1.7 percent to hover around 39,065 in the afternoon trade. The sectoral index has now extended gains for a second consecutive session and is currently one of the top gaining sectors.
After Powell's testimony, several analysts increased expectations of a rate cut as soon as July, or in September. They also estimated another rate cut to follow during the course of the year. This increase in hopes for further rate cuts boosted the shares of IT companies, who derive a major portion of their revenues from the US economy.
While testifying before the Committee on Financial Services, Powell said the US economy is in a solid position, despite heightened uncertainty. "The unemployment rate remains low, and the labor market is at or near maximum employment. Inflation has come down a great deal but has been running somewhat above our 2 percent longer-run objective. We are attentive to the risks to both sides of our dual mandate," he said.
Powell, however, reiterated that higher tariffs could hike inflation. "I think if it turns out that inflation pressures remain contained we will get to a place where we cut rates sooner than later," he said.
Mphasis shares were the top gainer on the index, jumping nearly 3 percent to trade at Rs2,753 apiece. Heavyweight Infosys shares jumped over 2 percent to trade at Rs 1,618 apiece. LTIMindtree and Tech Mahindra (TechM) shares gained around 2 percent each, while Coforge, HCL Tech and Tata Consultancy Services (TCS) shares rose over 1 percent each. Persistent Systems shares were trading in the green with marginal gains.
Wall Street too cheered the increased hopes of two rate cuts later this year, with the Tech-heavy Nasdaq at record high following the testimony.
Powell's testimony comes after severe backlash from US President Donald Trump, who called him a "very dumb, hardheaded person" for not cutting rates. In a post on Truth Social, Trump said that Europe has had 10 rate cuts, while America had none, despite there being "no inflation" in the "great economy". "We should be at least two to three points lower. Would save the USA 800 Billion Dollars Per Year, plus. What a difference this would make. If things later change to the negative, increase the Rate," he said.
Trump further wrote, "I hope Congress really works this very dumb, hardheaded person, over. We will be paying for his incompetence for many years to come. THE BOARD SHOULD ACTIVATE. MAKE AMERICA GREAT AGAIN!"
(With inputs from Reuters)
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