Infosys, TechM, others up 2% as US Fed chief Powell's testimony spurs rate cut bets

IT Stocks Rally on Dovish Fed Signals

Shares of Indian IT giants such as Infosys, Tech Mahindra (TechM), Wipro, and HCL Technologies surged up to 2% on Tuesday, tracking overnight gains on Wall Street. The rally was spurred by U.S. Federal Reserve Chair Jerome Powell’s testimony to Congress, which signaled growing openness to interest rate cuts later this year, reigniting investor optimism globally, particularly in export-oriented sectors like information technology.

The Nifty IT index climbed over 1.8% during early trade, significantly outperforming the broader market. Among key gainers, Infosys rose 2.2%, Tech Mahindra added 2%, Wipro climbed 1.7%, and HCL Tech edged 1.5% higher.

Powell's Comments Spur Global Repricing of Rate Expectations

In his semiannual monetary policy testimony before the Senate Banking Committee, Powell acknowledged that while the U.S. economy remains strong, inflation is showing signs of sustainable cooling. He said, "More good data would strengthen our confidence that inflation is moving sustainably toward 2 percent." The language was interpreted as a dovish shift by market participants, especially in light of the Fed’s repeated emphasis on data-dependency.

The 10-year U.S. Treasury yield dropped to 4.24%, and the dollar index weakened, providing further support for emerging market equities. The tech-heavy Nasdaq Composite rose over 1.2% on Monday, adding momentum for Indian IT stocks in Tuesday’s session.

Analysts See Improved Revenue Visibility for Indian IT

Analysts believe the potential for U.S. rate cuts improves the outlook for Indian IT companies, which rely heavily on North American clients for a substantial portion of their revenues. A looser interest rate environment in the U.S. could drive enterprise spending on digital transformation and cloud services, areas where Indian companies have been ramping up capabilities.

"Powell's testimony is being viewed as a turning point in Fed communication. If the rate cut cycle begins by September, it could stimulate tech capex, reversing the slowdown in discretionary IT spending we've seen over the past year," said Naveen Kulkarni, Chief Investment Officer, Axis Securities.

He added that deal pipelines are already showing signs of recovery, especially in areas such as AI integration, cloud migration, and cybersecurity.

Sector-Specific Tailwinds for IT

Indian IT firms, which have faced challenges over the last few quarters due to budget cuts in the U.S. and Europe, now find themselves in a favorable position. The rupee’s slight depreciation against the U.S. dollar this week also provided an added earnings advantage.

"With macros turning supportive and valuations remaining reasonable after the recent correction, IT stocks are seeing renewed investor interest," said Richa Narain, Head of Equities at Nirmal Bang. She pointed out that large-cap IT names like Infosys and TCS are expected to lead the recovery, supported by their strong order books and operational efficiency.

Market Context: Nifty IT Outperforms Benchmark

At 11:00 AM IST, the Nifty IT index was trading at 35,450, up 1.84%, while the Nifty 50 was up 0.55% at 23,625. The broader IT rally also extended to mid-tier firms such as LTIMindtree (+2.4%) and Persistent Systems (+2.1%).

Trading volumes in IT counters were higher than average, indicating institutional accumulation. Foreign Institutional Investors (FIIs), who have been net sellers in recent weeks, turned net buyers of ₹1,250 crore on Monday, with a significant chunk flowing into technology and banking stocks.

Investor Outlook: A Tactical Rebound or Start of a New Cycle?

While optimism is building, some experts remain cautious. The full effect of Fed policy shifts will only be visible over the coming quarters, and enterprise spending trends remain somewhat fragile amid global economic uncertainties.

"This could be a tactical rebound ahead of Q1FY26 earnings, but sustained upside depends on actual recovery in client budgets and revenue growth," cautioned Rohit Khatri, VP - Research at ICICI Securities. He added that Infosys and Wipro’s guidance in the upcoming quarterly results will be crucial to validate the rally.

Nevertheless, long-term investors are viewing the current environment as a potential accumulation zone. IT stocks, many of which were trading at multi-quarter lows in early 2025, now appear better poised for re-rating as the global rate cycle turns.

Jerome Powell’s softer tone on inflation and rates has sparked hope for an IT revival, with Indian tech giants riding a wave of optimism. While it's early to call it a full-blown trend reversal, improved macro visibility and a more dovish Fed could mark the beginning of a better earnings cycle for India’s flagship export sector.