IT Stocks Slide 3.5% as Fed Holds Interest Rates; LTIMindtree, Tech Mahindra Lead Decline

Swift Summary

• U.S Federal Reserve Decision: The Fed maintained its benchmark interest rate at 4.25% – 4.5% for the sixth consecutive meeting, signaling persistent inflationary pressures and slower monetary easing.
• Revised Forecasts:

– GDP growth projection for 2025 downgraded to 1.4% from 1.7%.
– Core PCE (preferred inflation gauge) raised to an expected level of 3.1%, up from earlier predictions of 2.8%.
– Unemployment rate projected to rise to 4.5%.

• Divergence Among FOMC Members: Increasing divergence, with seven out of nineteen members expecting no rate cuts in 2025 compared to four in March.
• Impact on Indian IT Stocks:

– Major declines across companies: LTIMindtree (-3.5%), Tech Mahindra (-3%), Persistent Systems, Mphasis, Infosys, and others fell between (-1%) and (-2.6%).
– Meaningful fall observed for Cyient stocks (-4%), Birlasoft, and Firstsource Solutions (~2%-3%).
– Nifty IT Index ended down by (-1.4%), except Wipro (+0.7%) which gained slightly.

Indian Opinion Analysis

The reaction of Indian IT stocks indicates heightened investor sensitivity toward global monetary decisions,especially since the U.S Federal Reserve’s posture indirectly impacts demand dynamics within India’s export-driven IT sector.The Fed’s unchanged policy coupled with a cautious tone suggests extended periods of elevated borrowing costs in the U.S., slowing discretionary tech spending by American corporates-an essential customer base for India’s IT firms.Declining projections for U.S GDP growth alongside rising inflation expectations further compound uncertainty about future revenue streams from this major market segment.

While broader economic fundamentals remain stable globally as per Powell’s remarks-describing solid growth in economic activity-it highlights that India must navigate these external pressures proactively while maintaining domestic resilience within its financial systems and export sectors reliant on overseas markets like America.

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