Nifty IT Surges Over 2% As Crude Price Fall Eases Fed Rate Hike Fears

IT stocks led market gains on Monday, with heavyweights Infosys and TCS rising sharply and the Nifty IT index climbing more than 2% as easing expectations of a US Federal Reserve interest rate hike boosted sentiment towards the rate-sensitive sector.

The improvement in the Fed outlook followed a sharp decline in crude oil prices after the United States and Iran paused military action over the weekend, easing concerns that elevated energy costs could keep inflation higher and force the US central bank to tighten monetary policy further.

At 12 p.m., the Nifty IT index was up 2.61%, making it the top-performing sectoral index on the NSE. The broader market also traded firmly higher, with the Sensex gaining around 680 points, or 0.89%, to 76,740, while the Nifty rose 197.80 points, or 0.83%, to 23,965.

Market breadth remained positive, with 2,569 shares advancing against 868 declining, while the India VIX dropped 5.63%, signalling an easing in market volatility.

IT Heavyweights Lead The Rally

Four of the country's five largest IT companies featured among the major gainers on the Nifty 50.

Infosys jumped 3.76%, while Tech Mahindra gained 2.38%. HCL Technologies advanced 2.07% and TCS rose 1.97%. LTIMindtree was also up 2.28%, while Wipro traded 1.07% higher.

The broad-based gains helped the Nifty IT index outperform other sectoral indices during the session.

Crude Price Fall Eases Inflation Concerns

The rally followed an improvement in global risk sentiment after signs of de-escalation in the Middle East.

Iran said it would halt attacks as long as the US refrained from further military action, raising hopes of a diplomatic solution to the conflict.

The development sent Brent crude sharply lower after the global benchmark briefly crossed $100 a barrel last week, reducing fears of a prolonged energy shock.

Lower crude prices helped ease concerns that another surge in energy costs could fuel inflation and force central banks to maintain tighter monetary policy.

Fed Rate Hike Odds Decline

The retreat in oil prices also prompted investors to reduce expectations of an imminent interest rate increase by the US Federal Reserve.

According to CME FedWatch data, markets were 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, Reuters reported.

The shift provided support to technology stocks, which tend to be sensitive to changes in interest rate expectations. Lower rates or reduced expectations of further tightening can support valuations by lowering the discount rate applied to future earnings.

Global Tech Stocks Join Rally

Improved risk appetite was also visible across global markets, with US equity futures pointing towards a positive opening.

S&P 500 futures gained 0.7%, while Nasdaq futures climbed 1.1%, with technology stocks leading the advance.

Investors will now closely track the Federal Reserve's policy decision this week for further signals on the trajectory of US interest rates, alongside corporate earnings and developments in the US-Iran conflict.