IT sector benefits from US economic developments
With the Nifty IT index crossing the 46,000 mark, the sector is now in a recovery phase, driven by favorable developments in the U.S. economy, analysts observed. The Nifty IT index, on Thursday, closed at ₹45,688.85. However, its day high was ₹46,002.65. At the beginning of the week, the index closed at ₹44,832, marking a 1.91 percent climb since.
Additionally, relatively slow deal-making is expected to pick up in 2025, potentially accelerating in the second half of the year. This could create growth opportunities for Indian IT firms, allowing them to secure larger deals and expand their global market presence.
Narendra Solanki, Head Fundamental Research – Investment Services, Anand Rathi Shares, and Stock Brokers, explained, “The Indian IT sector saw a positive trading session today, driven by favorable developments in the U.S. economy. The U.S. November Consumer Price Index (CPI) report met economists’ expectations, boosting investor optimism about the possibility of another interest rate cut by the Federal Reserve in its upcoming policy meeting.”
Beneficial move
Such a move is seen as beneficial for the technology sector, as it could stimulate tech-related spending in the US, one of the largest markets for Indian IT services, he stated.
The sector, currently in a recovery phase, is supported by the strength of the US economy and its outlook post-rate cut, Solanki observed. With the Federal Reserve adopting a more accommodative approach, the sector anticipates a rebound in the demand for technology services.
The relatively slow deal-making is also expected to pick up in 2025, with a potential acceleration in the second half of the year. “This could create significant growth opportunities for Indian IT firms, allowing them to secure larger deals and expand their global market presence.”
Siddhartha Khemka, Head – Research, Wealth Management, Motilal Oswal Financial Services, said, “On the sector front, only IT and Metals managed to close in the green. The Nifty IT index surged 0.8 per cent, boosted by gains in US tech stocks after the US posted in-line retail inflation data, reinforcing expectations of a 25 bps rate cut by the Fed Reserve next week.”
A Motilal Oswal Financial Services (MOFSL) report also documented that IT services vendors are largely immune to immigration shocks. Technology spending is expected to trend upwards for CY2026/27, led by a business-friendly administration and declining interest rates.
Rejection rates
The first term of the Trump presidency led to an outsized increase in rejection rates for H1B visas, surging from an average of 4.6 per cent before 2016 to 15.4 per cent during the presidency. “This was a blessing in disguise for the IT services sector; however, the companies altered their hiring strategies and increased localised on-shore hiring,” the report said.
IT services’ hiring plans are now decoupled from the H1B regime, with the number of applications having dipped by 51 per cent from the peak of FY17. While the new administration may be incrementally positive about skilled immigration, the impact is expected to be neutral to marginally positive.
Trump’s Tax Cuts and Jobs Act (TCJA, Dec’17) reduced the federal corporate tax rate to 21 percent from 35 percent, with a few other tax sops for the US corporates. This was linked to a bump in earnings growth across industries like BFSI, IT and software, Energy, and Industrials.
The top five Indian IT services companies posted an average revenue growth of 7.5 percent during 2016-20 when Trump was at the helm of the White House, while the growth was 7.9 percent during the first three years of the presidency.
“Technology spending has been depressed over the past two years, and we believe a new regime, with continued rate cuts, augurs well for the tech spending cycle,” MOFSL said in the report.
Among the top gainers for the day were Coforge, whose shares closed at ₹9,188.60, up by 2.10 percent, Persistent Systems, who closed at ₹6,437.95, up by 1.23 percent, Tech Mahindra, closing at 1,784.05, up by 1.21 per cent, LTIMindtree closing at ₹6,667.55, up by 1.04 percent and LTTS, which closed at ₹5,415.25, up by 0.84 per cent.
Alongside, Aditya Gaggar, Director of Progressive expressed optimism about Infosys, who had revised its revenue guidance to 3.75 – 4.5 percent in constant currency for the rest of FY25, up from the 3-4 percent it had guided in Q1. “Heavyweight IT stock, which is Infosys, is set to give a major breakout from a Rounding Bottom formation which will push the IT sector and Nifty50 higher,” he said.
Shares of Infosys closed at ₹1,985.10, up by 0.55 percent. The company’s 52-week high was ₹1,998.80.