Optimism from U.S. President Donald Trump's commentary on a trade deal between U.S. and India sent information technology stocks rallying sharply on Wednesday, July 2, despite a muted market sentiment. Further, optimism around the sector's upcoming earnings results also drove gains.
Despite the muted market sentiment, the IT index was holding firm. After jumping 1.7 percent at open, by 10.40 a.m., the index trimmed gains to trade higher by 0.6 percent. Infosys, Mphasis, TCS, and Coforge were among the top gainers, rising up to 1.2 percent. The sole loser on the index is Oracle Financial Services Software.
Investors were also optimistic about rate cuts from the U.S. Federal Reserve. Recently, international brokerage Goldman Sachs changed its expectations on an interest rate change from the central bank, pushing estimates ahead to September, instead of December, as Trump's tariffs are likely to have a lower inflationary impact than anticipated.
Citigroup and Wells Fargo anticipate a total of 75 basis points in rate cuts by the Federal Reserve in 2025, while UBS Global Research projects a steeper reduction of 100 basis points. Despite differing estimates, all four brokerages agree that the rate-cutting cycle is likely to commence in September.
The risk-on sentiment comes amid hopes of sales growth, as these IT players depend on services exports to the U.S. for a large portion of their revenue. Extra liquidity in the U.S. economy following a rate cut could spur deal wins from America-based clients, positively impacting the topline of these firms.
Over the past six months, Nifty IT have cracked 12 percent as a result of the global volatility and uncertainty, especially as a result of US President Donald Trump's tariff policies.
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