What does Fed's indication of single rate cut mean for Indian IT stocks?

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Also Read: Why is gold price nosediving today after US Fed meeting?Positive indications from the Fed regarding potential rate cuts are particularly significant for markets, especially those in India, and specifically for Indian IT companies. This is because Indian IT firms generate a substantial portion—over 70%—of their revenues from the United States.

Higher interest rates in the US typically result in reduced consumer spending and lower corporate investment, which in turn leads to decreased orders and lower growth prospects for Indian IT companies. Historically, IT stocks have shown sensitivity to US economic indicators and monetary policy decisions.Between December 2023 and February 2024, Indian IT stocks experienced a remarkable surge in anticipation of the Fed's first rate cut in March 2024.

However, due to persistent inflationary pressures, the Fed opted to maintain its rates during that month. Nonetheless, the Fed indicated its intention to implement three rate cuts throughout 2024.Also Read: US Fed holds rates at 23-yr high; expects one rate cut in 2024; 5 key takeawaysMoving forward to the latest, the Federal Reserve on Wednesday chose to keep the rate unchanged at a 23-year high range of 5.25% to 5.50%.

Moreover, the Fed revised its projected number of rate cuts from three, as signaled in March, to just one. This adjustment effectively removed the possibility of two rate cuts from consideration.The "dot plot," reflecting the views of 19 FOMC members, including both voters and nonvoters, revealed that four officials favored no cuts for the current year, while seven members projected a single reduction.