Nifty IT rises 5% in 1 week; will Fed rate cut aid further rally in stocks?

Among individual stocks, Infosys, Wipro, Oracle Financial Services Software, and Mphasis shares rose 3 per cent each on Monday

IT shares rising today

 

Shares of information technology (IT) companies continued their upward movement on Monday with the Nifty IT index surging over 2 per cent on the National Stock Exchange (NSE). The sectoral gauge was outperforming the market.

 

In the past one week, the Nifty IT index has rallied 5 per cent as against a 0.36-per cent rise in the Nifty50 index during the same period.

 

Among individual stocks, Infosys, Wipro, Oracle Financial Services Software, and Mphasis shares rose 3 per cent each, while share prices of Tata Consultancy Services (TCS), HCL Technologies, Coforge, Persistent Systems, LTIMindtree, and Tech Mahindra gained 2 per cent each.

 

In the past one week, the stock prices of Infosys and TCS have rallied 6 per cent and 4 per cent, respectively.

 

That said, despite the recent rally, the Nifty IT index has underperformed the market thus far in calendar year 2025, by falling 16 per cent as against a 5.6 per cent gain in the Nifty 50 index.  CATCH STOCK MARKET UPDATES TODAY LIVE

Why are IT stocks rising today?

 

IT shares rallied on Monday amid expectations that the US Federal Reserve may resume its rate cut cycle soon. In the US, the markets are factoring-in an 84-per cent chance of a September cut and over 100 bps of easing by mid-2026.

 

Fed Chair Jerome Powell, last Friday, signaled a likely September rate cut during his final Jackson Hole speech, boosting risk assets. HIs statement, however, also stirred stagflation concerns as inflation lingers and growth slows.

 

Markets welcomed his dovish tone with Treasury yields falling and Wall Street indexes rallying, though some analysts warn that optimism may be overdone.

 

"Political pressure from President Trump has heightened worries about Fed independence, especially after his remarks targeting Governor Lisa Cook. Futures now price an 80 per cent chance of a September cut, but investors await fresh labor and inflation data before the next Fed meeting," Choice Equity Broking said.

 

Analysts at JM Financial Institutional Securities, however, believe that moderating inflation expectations, easing labour market situations (including IT Ops /Helpdesk/Software development jobs), and hopes that companies will absorb tariff-linked cost escalation have improved odds of Fed-rate cuts in September.

 

"This could possibly be a catalyst for mean reversal in IT Services' valuation," the brokerage said.  ALSO READ | YES Bank rises 5% on RBI nod for Sumitomo stake buy; what analysts expect?

Brokerages view on IT services sector

 

Management teams of IT services companies maintaind a cautiously optimistic outlook while recognising that ongoing macroeconomic headwinds continue to pressure overall demand.

 

Infosys maintained a cautiously optimistic stance (upgrading the lower end of guidance) during the June quarter results, with the upper end of its 3 per cent Y-o-Y organic constant currency (CC) guidance hinging on a gradually improving environment. HCL Technologies, on the contrary, remained the most constructive, guiding for 3–5 per cent Y-o-Y CC growth (also, upgrading the lower end of guidance), analysts at Motilal Oswal Financial Services noted.

 

JM Financial analysts, however, think if IT companies choose to absorb most of the tariff increase, then it may squeeze IT Services' spend.

 

"These pressures, in turn, are driving higher vendor consolidation opportunities – a positive – and margin pressures – a negative. That said, benign valuations and subdued expectations mean these concerns are likely priced in. Fed rate cut could, therefore, trigger a minor bounce back," analysts said.

 

Meanwhile, despite the recent moderation in capex cycles among Western OEMs, the long-term outlook remains robust.

 

"Asian OEMs are pivoting toward hybrids and localised strategies, while global players are recognising software as the key competitive frontier. This backdrop offers tailwinds for specialised engineering service players with domain depth, codevelopment capabilities, and global delivery footprints," MOFSL said in a sector note. The brokerage firm has initiated coverage on KPIT Technologies with a 'Buy' rating and a target price of ₹1,600.

 

It has also initiated coverage on Tata Technologies and Tata Elxsi with 'Sell' ratings and share price targets of ₹580 and ₹4,600, respectively.