What's driving the rally in Indian IT stocks today
What's the story
Leading Indian IT stocks, including Infosys and Tata Consultancy Services (TCS), witnessed a significant surge in their share prices on Monday. The rally was led by the Nifty IT index which rose over 2%, making it the top-performing sectoral index on the National Stock Exchange (NSE). The spike comes as expectations of a US Federal Reserve interest rate hike have eased.
Market response
Broader market also remains firmly higher
The easing of US Fed rate hike expectations was triggered by a sharp decline in crude oil prices. This was prompted by the United States and Iran suspending military action over the weekend, which eased inflation concerns.
At 10:05am the Nifty IT index had risen 2.25%, outperforming other sectoral indices on NSE.
The broader market also remained firmly higher with Sensex gaining 533 points or 0.7% to trade at 76,593.
Stock performance
IT stocks among top gainers on Nifty 50
Four out of India's five largest IT companies saw their shares among the top gainers on Nifty 50.
Infosys surged by 2.98%, Tech Mahindra by 2.38%, TCS by 2.11%, and HCL Technologies by 2.10%.
LTIMindtree also gained nearly 2% while Wipro was the only major IT stock in red, down nearly 0.3% at the time of writing this article.
International impact
Global markets react positively to de-escalation signs
The rally in Indian IT stocks was also mirrored by global markets which reacted positively to signs of de-escalation in the Middle East.
Iran's announcement that it would halt attacks if the US refrained from further military action raised hopes for a diplomatic resolution, sending Brent crude prices lower by 5% after briefly crossing $100-a-barrel last week.
This eased fears of a prolonged energy shock and its inflationary impact.
Rate projections
Lower interest rate expectations boost tech stocks
The fall in oil prices has led investors to lower their expectations of an imminent rate increase by the US Federal Reserve.
According to CME FedWatch data, markets are now pricing in a 33.7% probability of a 25-basis-point rate hike at the Fed's policy meeting concluding on Wednesday, down from 37.4% on Friday.
Lower interest rate expectations generally favor technology stocks as their valuations benefit from lower discount rates.