Indian shares rose as IT stocks led gains amid expectations of a US Federal Reserve rate cut. Indian shares climbed on Monday, September 1, 2025, in Mumbai, with the IT sector leading the gains due to hopes of a US rate cut, driven by strong domestic GDP data and US PCE figures, which boosted market sentiment.
Why it Matters
Indian IT sector gains from US rate cut hopes signal economic optimism in South Asia, strengthening India’s $283 billion IT industry, a key regional employer, while influencing investment flows in neighbouring markets like Pakistan and Bangladesh.
Indian IT Sector Gains from US Rate Cut Hopes
On Monday, September 1, 2025, at 10:23 AM IST, the Nifty 50 index rose 0.42% to 24,527.55 points, and the BSE Sensex gained 0.39% to 80,124.78 points, per Bombay Stock Exchange (BSE) data. The IT sector, which earns over 50% of its revenue from the US, surged 1.3%, driven by expectations of a US Federal Reserve rate cut in September 2025. According to the BSE on X, “IT stocks led today’s rally, reflecting positive sentiment.”
Economic Drivers Behind the Surge
India’s GDP grew 7.8% in the April–June 2025 quarter, exceeding expectations and bolstering investor confidence, per the Ministry of Statistics. US Personal Consumption Expenditures (PCE) data, released Friday, August 29, 2025, showed inflation at 2.5%, raising the likelihood of a 25-basis-point rate cut to 84%, per CME FedWatch. Lower US rates could revive technology spending, benefiting Indian IT firms like Tata Consultancy Services (TCS) and Infosys.
Sector Performance and Market Trends
Fifteen of 16 major sectors gained, with small-caps and mid-caps up 1.1% after a two-week lag, per NSE data. The National Stock Exchange on X noted, “Small-caps and mid-caps outperformed benchmarks today.” The IT sector’s rally reflects its sensitivity to US economic signals, as lower borrowing costs encourage corporate tech investments. However, looming US tariffs, set to rise to 50% on Indian goods by Tuesday, September 2, 2025, pose risks.
Regional and Global Implications
US rate cuts make emerging markets, such as India, more attractive to foreign investors, potentially increasing inflows. India’s robust GDP growth and stable rupee (INR 83.9 to USD, August 2025) contrast with regional challenges, such as Pakistan’s 4.2% inflation rate. The IT sector, employing 5.8 million in fiscal 2025, per Nasscom, drives regional economic stability, with spillovers to South Asian trade.
Background
India’s $283 billion IT sector, projected to hit $300 billion in fiscal 2026, relies heavily on US clients. Past US rate cuts, such as in 2023, spurred IT stock gains of 4.5% in a single day, according to Reuters. The 2025 rally follows a tepid fiscal 2024, with IT growth at 4%, which was impacted by cautious US spending amid high interest rates.
What’s Next
As US rate cut hopes drive Indian IT sector gains, investors await Federal Reserve decisions in September 2025, with tariff uncertainties potentially affecting market momentum.
Published in SouthAsianDesk, September 1st, 2025
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