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Nifty IT index falls 3% as US Fed slows rate cut pace

Stocks
2 min Read Nov 18, 2024
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The Indian IT sector witnessed a significant dip on Monday, November 18, with the Nifty IT index falling by over 3%. This comes as traders recalibrate their expectations about Federal Reserve rate cuts after fresh data pointed to the resilience of the US economy. 

The retreat in the Nifty IT index, which had previously shown resilience despite a stronger US dollar, is a reminder that global economic developments can heavily influence share market investment trends, especially in sectors like IT.

Impact of economic data on IT stocks

By 12:30 PM on November 18, the Nifty IT index was down 2.64% at 41,269 after dipping as low as 41,035. All 10 constituents of the index traded in the red, with Wipro leading the decline, down by 3.6%. Major IT stocks such as Infosys, TCS, and LTIMindtree also saw losses exceeding 3%. 

This negative sentiment was triggered by economic data out of the US, including a rise in October retail sales and an increase in the consumer price index (CPI), which showed a modest uptick in annual inflation. Moreover, the drop in jobless claims underscored a strong US economy, leading traders to believe that the Federal Reserve may slow its pace of rate cuts.

US Fed's stance and share market investment outlook

Federal Reserve Chair Jerome Powell's recent comments added further pressure on the Nifty IT index. Powell stated that the central bank was "not in a hurry" to cut rates, emphasising the strength of the US economy and its ability to absorb more cautious decisions on interest rates. 

With the latest data showing a 62% probability of a 0.25% rate cut in December, traders are adjusting their share market investment strategies to align with this outlook. The potential for slower rate cuts, coupled with uncertainty about the 2024 US Presidential election and potential fiscal policies under Donald Trump, has kept investors on edge.

Key takeaways

  • The Nifty IT index saw a sharp decline, driven by expectations of slower Federal Reserve rate cuts.

  • Positive US economic data, including retail sales and a drop in jobless claims, has reduced the likelihood of aggressive rate cuts in 2025.

  • The IT sector still shows a 2.42% gain for the month, but traders are adjusting their positions in reaction to the changing economic landscape.

  • Share market investment in Indian IT stocks may remain volatile due to global economic factors, including US fiscal policy and Federal Reserve decisions.

In summary, while Indian IT stocks have enjoyed a good run, the market remains sensitive to US economic signals, with investors needing to stay alert as the global environment evolves.