IT Stocks Rally for Second Day on Hopes of India-U.S. Trade Talks and Fed Rate Cut

IT stocks extended strong gains for a second consecutive session on September 10, reversing a five-day losing streak. The Nifty IT index rose & closed at 36,183.80, leading sectoral indices with a gain of over 2.5%. Shares of major IT firms such as OFSS, Wipro, and Infosys saw significant jumps, driven by optimism around India-U.S. trade talks and expectations of a U.S. Federal Reserve rate cut.

Trade Talks Boost Sentiment

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Investor confidence was buoyed after former U.S. President Donald Trump announced that India and the United States would resume negotiations to address trade barriers. In a post on Truth Social, Trump said he looked forward to discussions with Prime Minister Narendra Modi and expected a successful conclusion beneficial for both countries. While IT services were not directly affected by tariffs, easing trade tensions is likely to benefit Indian IT companies, which derive a major portion of their revenue from the U.S. market.

Hopes of U.S. Rate Cut

The U.S. Federal Reserve is scheduled to hold its FOMC meeting from September 16 to 17. Analysts increasingly anticipate a rate cut due to weakening jobs data and mounting pressure from the U.S. administration. Recent data indicated that the U.S. economy created 911,000 fewer jobs in the past year than previously estimated, raising expectations of easier monetary policy. A rate reduction could boost discretionary spending, indirectly benefiting Indian IT firms with significant U.S. exposure.

Stock-Specific Triggers

Following a favourable forecast for Oracle Corp.'s cloud business, Oracle Financial Services Software Share Price (OFSS) increased by over 10%. Mphasis increased by 4%, Persistent Systems by over 5%, and Coforge and LTI Mindtree by more than 4% & 2% respectively apiece. While TCS and Infosys had advances of nearly about 2%, Wipro, HCL Tech, and Tech Mahindra saw increases of around 2%.  Infosys' announcement that its board would convene on September 11 to discuss a share repurchase proposal—the first since 2022—further bolstered the rise.

Analysts’ Views

Experts pointed out that Indian stocks received timely assistance from two factors: the rationalisation of the GST and anticipated Fed rate decreases. Vibhavangal Anukulakara Pvt. Ltd.'s founder, Siddharth Maurya, emphasised the industry's tenacity and centrality to India's development narrative. INVasset PMS's Business Head, Bhavik Joshi, cautioned against it, pointing out that overall IT earnings haven't shown a significant recovery and that overseas investors are still cautious. While optimism is clear, investors should wait for sustained stability before anticipating a long-lasting recovery, says experts.

Conclusion

The IT sector’s short-term recovery reflects renewed optimism around global trade and monetary policy. While selective gains are visible, experts advise measured optimism, noting that sustained recovery will depend on contract wins, global tech spending, and broader market trends.