IT shares rise for 3rd day on rising US rate cut hopes; HCLTech, Mphasis lead gains

IT stocks rise on Fed rate cut hopes

The shares of Indian IT companies gained in trade on December 5, pushing the Nifty IT index higher up in the green to extend gains for the third consecutive session. This comes amid rising expectations of a rate cut by the US Federal Reserve.

The Nifty IT index gained around 301 points (0.8 percent) to 38,661.95, as seen at 2.45 pm. The index has emerged as one of the top sectoral gainers today.

Fed rate cut hopes:

Despite initial expectations of a no rate cut, a higher probability of a December rate cut by the US Federal Reserve has been boosting global markets. The American central bank is now expected to reduce its key interest rate by a quarter-percentage point during its FOMC meeting scheduled from December 9-10, a Reuters poll of over 100 economists found.

"I'm expecting the Fed will cut at the meeting next week. I know there's been a lot of back and forth especially after October about Powell being somewhat hawkish, but that, I think, was more about a lack of available data due to the shutdown," said Thomas Simons, chief US economist at Jefferies.

Fed Governor Christopher Waller recently said that the American job market is weak enough to warrant another quarter-point rate cut in December. Earlier, New York Fed President John Williams, a permanent voter on rate policy and vice chair of the rate-setting Federal Open Market Committee, said that interest rates can fall "in the near term".

"I view monetary policy as being modestly restrictive...Therefore, I still see room for a further adjustment in the near term to the target range for the federal funds rate to move the stance of policy closer to the range of neutral," Williams said.

How Fed's rate cut decision impacts Indian IT companies?

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.

Top IT gainers today:

HCL Technologies shares jumped nearly 2 percent to trade at Rs 1,682.90 apiece. Mphasis and Infosys shares rose more than 1 percent each.

Wipro, Persistent Systems and Tech Mahindra shares were nearly 1 percent, while Coforge, LTIMindtree and Tata Consultancy Services (TCS) shares were trading in the green with marginal gains.

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