IT Stocks Gain Amid Increasing Bets On US Fed Rate Cut, Firm US Dollar

Information technology (IT) stocks gained up to 3.6 per cent on November 24 amid increasing bets on US Federal Reserve cutting rates in its December meet, and a firm US dollar.

Leading the gains was Tech Mahindra, which advanced up to 3.57 per cent, followed by mid-cap IT stocks Mphasis and Persistent Systems, which also gained more than 2 per cent each. Index heavyweights Infosys and Tata Consultancy Services (TCS), which together constitute more than 50 per cent weight in the IT index, were also trading in the positive territory, as of the time of filing this report.

Nifty IT index, which tracks the 10 most valuable and active stocks from the sector, rose as much as 1.81 per cent. The IT index has rallied more than 12 per cent over the past two months, however, it still trades around 18.50 per cent from its all-time high.

Increased Bets On US Fed Rate Cut

The rate-cut expectations lifted risk appetite in the sector, helping IT counters outperform in an otherwise mixed market.

According to the CME FedWatch tool, traders are now pricing in a 71.5 per cent probability that the Federal Reserve will cut the benchmark rate to 3.50–3.75 per cent at its Federal Open Market Committee (FOMC) meeting on December 9–10. This is a 27 percentage points jump from about 44.4 per cent a week ago.

The trigger came after comments from New York Fed President John Williams, who said at an event in Santiago on November 21 that the current monetary policy was “somewhat restrictive” and that there may be “room to adjust the policy rate.” His comments reinforced the expectation of a dovish stance by by the Fed.

According to Sumit Pokharna, vice president - fundamental research, Kotak Securities, “In general, lower interest rates in the US is positive for Indian IT sector. Indian IT sector has significant exposure to US banking, financial services, and insurance (BFSI) sector.”

Further, a softer rate environment typically boosts technology spending by banks and financial institutions. Dhanshree Jadhav, analyst – technology, Choice Institutional Equities said, “Fed rate cut will have positive impact on Indian IT companies as clients will start spending more easing down the demand scenario, which currently seems week due to macro uncertainties.”

US Dollar Stays Firm Despite Increased Fed Rate Cut Bets

The US dollar index, which measures the greenback against a basket of six major currencies, stayed put above 100.13 despite the increased optimism around Fed rate cut. Typically, rate cuts weaken the US dollar as dollar-denominated assets like bonds and money market instruments become less attractive for investors and that reduces foreign capital inflows, thereby reducing demand for the greenback.

Indian Rupee in the previous session on November 21 had slipped to its record low of 89.49. Over the previous two sessions, the rupee had lost more than 1.20 per cent.

Pokharna said, weaker rupee is generally positive for exporters like IT sector. However, in early session today, the domestic currency rebounded over 0.45 per cent to 89.20 against the US dollar, as of 1:00 PM.

IT Sector Outlook

Several brokerages have recently released reports saying how emerging artificial intelligence (AI) adoption is set to have positive impact on Indian IT services companies in the coming years.

Motilal Oswal Financial Services, in its report dated November 24, argued that the long-awaited AI-led services cycle may finally be nearing a meaningful inflection point. The brokerage said that a sector-wide re-rating would depend on the emergence of a new AI services cycle, something that, so far, had been “a waiting game until the AI capex cycle moderates.”

According to the report, that wait “may now be ending.” The brokerage also noted that, much like the cloud build-out phase between 2016 and 2018, the core “store, compute and infra layer are now in place,” and while hyperscaler capex may continue, “incremental spends on AI and services” are set to accelerate.

The brokerage added that the sector may be past the worst. “We believe we are at the bottom and the risks skew to the upside,” it said, arguing that current valuations already reflect “status quo (GenAI-led deflation, demand apathy)” while offering room for “outsized gains” if AI-driven services spending picks up as expected.

The firm expects a recovery to begin showing up in the numbers in the second half of FY27, “taking full shape in FY28 as enterprises enter full-scale AI deployment.”

Choice Broking, in its rescent Q2FY26 review note on IT sector, observed that Indian IT companies have “resumed slower hiring trend since FY23-24,” a shift that has “enhanced employee productivity led by accelerated AI adoption across clients’ digital transformation journeys.” This trend, it said, is already visible in the industry’s “resilient growth and stable margins as witnessed in Q2FY26.”

The brokerage’s analysis of the revenue-to-headcount growth ratio points to “early signs depicting non-linearity in IT Services business models infused by AI-led Acceleration.” Despite ongoing macro uncertainties and cautious client spending, the firm expects the sector to deliver “decent growth in FY26E,” supported by steady conversion of large deals and an expanding pipeline of opportunities tied to AI.

In its projections, the brokerage estimates that Tier-I IT firms will clock growth between “0.10 per cent and 6.6 per cent,” while Tier-II players are likely to outperform, posting growth in the “5.00–28.70 per cent” range for FY26E. Ebit margins, it added, are expected to remain broadly stable with “upward bias” as productivity benefits increasingly flow through.