Domestic tech stocks continued to trade higher for the second session on Wednesday, with stocks such as Oracle Financial Services, Persistent Systems, Coforge, and Mphasis gaining between 4% and 10%, causing the Nifty IT index to jump 2.8% to 36,255 level, leading to a two-day cumulative gain of 5.66%.
The renewed interest in tech stocks, following a recent sell-off, was triggered by growing bets that the US Federal Reserve will announce a rate cut of at least a quarter point next week, following a rapid deterioration in U.S. economic data, particularly on jobs.
Investors are betting that lower US interest rates could revive technology spending in the world’s largest economy, a key market for Indian IT exporters, while also making emerging markets such as India more attractive.
On Tuesday, the Bureau of Labor Statistics said the US economy likely created 911,000 fewer jobs in the 12 months through March, or roughly 76,000 fewer jobs per month, pointing to a softer labor market than previously estimated.
Combined with last week’s weak August jobs report, the data bolstered expectations for a 25-basis point Fed rate cut next week, while some traders are positioning for a larger 50 basis point move. Overall, markets are pricing in 66 basis points of easing this year.
However, any unexpected strength in inflation readings could disrupt that outlook. The August producer price index report is due Wednesday morning, while the consumer price index will be released on Thursday.
