US Fed's Shock Move: Indian IT Stocks PLUNGE as Rate Cut Hopes CRUMBLED!

Author

Aditi Singh | Whalesbook News Team

Detailed Coverage:

The Indian IT sector experienced a significant downturn on November 14, with shares tumbling as market expectations shifted regarding the US Federal Reserve's upcoming December policy meeting. Investors had anticipated a potential interest rate cut, but recent statements from Federal Reserve officials suggest a pause might be more likely.

San Francisco Fed President Mary Daly stated that decisions about rate changes are 'premature' just weeks before the meeting, indicating a less certain path towards easing. Minneapolis Fed President Neel Kashkari expressed hesitation about further rate cuts due to the economy's resilience and inflation remaining above the target. Boston Fed President Susan Collins echoed this sentiment, citing concerns about labor market deterioration and inflation data.

This change in outlook has directly affected short-term interest rate futures, with the probability of a rate cut on December 10 dropping from 67% earlier in the week to 47%.

**Impact**: This news has a direct impact on the Indian stock market, particularly the technology sector. A hold on US interest rates can reduce discretionary spending in North America, a key market for Indian IT firms. This could lead to slower revenue growth and impact profitability, causing investor sentiment to turn bearish. The Nifty IT index fell over 1 percent, and major companies like Infosys, Mphasis, Coforge, Tech Mahindra, Wipro, Tata Consultancy Services, Persistent Systems, HCL Tech, and LTI Mindtree all saw declines in their stock prices. Rating: 8/10.

**Difficult Terms**: * **Federal Reserve**: The central bank of the United States, responsible for monetary policy, including setting interest rates. * **Policy Repo Rate**: The source text uses the term 'policy repo rate.' In the context of the US Federal Reserve, this likely refers to its benchmark interest rate, typically the **federal funds rate target**. This is the rate at which banks lend reserves to each other overnight, and adjusting it is the Fed's primary tool for monetary policy. * **FOMC (Federal Open Market Committee)**: The principal body of the Federal Reserve responsible for setting monetary policy, including the target for the federal funds rate. * **Rate Cut**: A reduction in the benchmark interest rate by a central bank, intended to stimulate economic activity by making borrowing cheaper. * **Discretionary Spending**: Spending on non-essential goods and services, which consumers and businesses can cut back on if economic conditions tighten or they become uncertain. * **Investor Sentiment**: The overall attitude of investors towards a particular security or the market as a whole, often influenced by economic news, company performance, or geopolitical events.