Fed meeting: Can a hawkish US central bank derail the recovery in the IT stocks?

livemint.com:

Nifty IT index has been in the green since May this year on a monthly basis but concerns are growing that if interest rates in the US stay high for a longer than expected period, it will impact the Indian IT stocks. An aggressive Fed is bad news for economic growth in the US and a weakness in the US economy is bad news for Indian IT companies because of their high exposure to the US market. Even though the US Fed maintained a pause on interest rate hikes, on expected lines, its hawkish tone appears to have spooked markets and the Nifty 50 suffered a loss of almost a per cent in intraday trade on Thursday.

The US Federal Reserve unanimously voted to keep interest rates at a 22-year high mark ---between 5.25 per cent to 5.5- per cent, while forecasting an additional rate hike before the end of the year to bring down inflation. Read more: US Fed Meeting Highlights: At 5.25%-5.5%, FOMC holds rates unchanged at 22-year high-mark Experts expected the markets to react negatively to the Fed commentary. "The US Fed left interest rates unchanged but said that there is room for yet another rate hike in 2023 followed by two rate cuts in 2024.

Interest rates are likely to stay at an elevated level for longer than the market expected," said Apurva Sheth, Head of Market Perspectives and Research at SAMCO Securities. "The markets are likely to remain under pressure till they adjust and digest the fact that interest rates are actually not going down in a hurry. We believe that high interest rates are not good for the markets.

Both the yields and markets cannot stay at an elevated level for too long. Either one will break down. Given that the Fed is resolute in its stand it could be the markets which break down first," Sheth said.