Indian IT stocks started Thursday’s trading session with strength, buoyed by positive signals from global markets after the US Federal Reserve kept interest rates steady in March for the fifth straight meeting, at its two-day March policy meeting, which concluded Wednesday. The Fed’s “dot plot” showed that policymakers retained their projection of three rate hikes by the end of 2024.
In addition to the rate decision, Federal Reserve policymakers revised their economic forecasts, notably upgrading the US growth outlook for this year to 2.1%, up from 1.4% forecasted in December.
The Federal Reserve is presently holding interest rates at their highest level in more than twenty years, with the aim of gradually restoring inflation to the targeted 2% rate over the long haul. Since March 2022, the US central bank has raised its policy rate by 525 basis points to the current range of 5.25% to 5.50%.
Following the positive comments from the US Fed, major equity markets around the world concluded Wednesday’s session with gains, and this positive sentiment has carried over to Asia, where all major indices opened today’s session in positive territory. The Nifty 50 began the session with a gap up at 21,989 points and reached an intraday high of 22,025 points.
Indian IT companies, which have a significant reliance on US markets, also opened with gains, with the Nifty IT index breaking a four-day losing streak in today’s session, rising by 1.53% to touch an intraday high of 36,296 points.
Among individual stocks in the index, L&T Technology Services is trading with a gain of 2.6%, followed by Coforge, Persistent Systems, MphasiS, Wipro, HCL Technologies, LTIMindtree, Tech Mahindra, Infosys, and TCS, all trading with gains ranging between 0.5% and 1.5%, respectively.
Commenting on the Fed’s decision Dr V K Vijayakumar, Chief Investment Strategist, at Geojit Financial Services, said, “The uncertainty regarding the Fed decision is over with the Fed keeping the rates unchanged and refraining from a hawkish message. The Fed chief’s statement that “inflation has eased substantially while the labour market has remained strong” conveys conviction about the soft landing of the US economy and the possibility of probably three rate cuts this year.
“The response from the market was that the US indices were racing to record highs. This favourable global construct will have its positive impact on Indian markets too. The tug of war between FIIs and DIIs is being won by the DIIs for some time now. This trend will continue if the FIIs continue to sell, and, therefore, FIIs are likely to slow down their selling and may turn buyers. This will be positive for large-caps in banking, telecom, capital goods, and automobiles,” he added.