Fed pause, inflation risks drag IT stocks; TCS, Wipro, HCL drop up to 3%

IT stocks crash: Indian IT stocks came under significant selling pressure today after the Federal Reserve kept its key interest rates unchanged for the second consecutive time and a hawkish commentary from Chair Jerome Powell.

 

As of 12:15PM, the Nifty IT index was down 2.4 per cent, with all 10 constituents trading in negative territory. Barring LTM which slipped 1 per cent, the remaining nine stocks cracked as much as 3 per cent.

 

Individually, Coforge, Wipro, TCS, and Infosys dropped more than 2.5 per cent. Oracle Financial Services Software, Mphasis, Persistent Systems, Tech Mahindra, and HCL Tech were also down more than 2 per cent each.  Notably, Indian IT firms derive a major portion of revenue from the US market, making them sensitive to changes in interest rate expectations and inflation trends. If the inflation rate remains elevated, it could affect consumer spending, thus impacting demand for IT services and hurting their margins.  

 

The Federal Reserve has been signaling that further interest rate cuts are not guaranteed, and Powell said central bankers need to see progress on inflation before reducing their target rate further.

 

“If we don’t see that progress, then we won’t see the rate cut,” Powell said in remarks.  Meanwhile, the Fed's updated interest-rate projections show policymakers see one quarter-point rate cut in 2026 and one in 2027. According to a Bloomberg report, surging energy prices due to the West Asia crisis could ignite inflation and lead to rate hikes instead.

 

The decline in IT shares was also in line with selling in the broader markets as escalating geopolitical tensions in West Asia dampened investor sentiment across sectors.  Brokerage firm CLSA in a recent report said that ongoing west Asia tensions will have limited direct impact on Indian IT companies as their revenue exposure is in low single digits but the broader macro impact will depend on the duration of the conflict and impact on inflation, interest rates, GDP growth and broader IT services spending.

 

IT stocks have already seen a sharp fall this year, as the launch of several AI tools spooked the investors. The Nifty IT index has dived more than 20 per cent in 2026 so far.