Powell's September rate cut hint, JPMorgan's TCS upgrade fire up IT shares

Leading IT shares are sharply higher following US Federal Reserve chair Jerome Powell's dovish remarks at the Jackson Hole Symposium, and a bullish commentary by JPMorgan as it upgraded TCS to an Overweight from Neutral and raised price target to Rs 3,800 per share, implying a 24 percent potential upside.

The list of top gainers on the Nifty 50 index include Wipro, which is higher by over 3 percent, followed by Infosys, TCS, HCLTech and Tech Mahindra on August 25. The gains have taken the Nifty IT index higher by more than 2 percent in early trade. Indian IT companies derive a substantial part of their revenue from the US economy, driving the gains on the index following Powell's comments.

Fed chair Powell acknowledged a “shifting balance of risks” in the US economy, including signs of stress in the labour market, and hinted at possible “policy adjustments” in the coming months.

Following Powell's speech, Wall Street Traders bet there is an 84 percent chance of a Fed rate cut in September, after Powell signaled that the central bank may ease key rates before inflation fully returns to its target, at a time when the US labour market is showing a softness in hiring trend. A more stable rate environment could encourage companies to seek growth opportunities in emerging markets, leading to improved prospects for Indian IT companies. Lower US rates are likely to be make emerging markets assets, including India's IT shares, more attractive to foreign investors.