New Delhi: The US Federal Reserve is expected to announce a policy rate cut for the first time in over 2 years on Wednesday. IT sector stocks will remain in focus against this backdrop owing to their significant business interests in the US. IT serviced companies have often witnessed a slowdown in business activity when the US Fed slashed the policy rate in the past.
According to brokerage JM Financial, Indian IT companies may not witness a slowdown this time around since the rate cuts may have already been priced in by IT stocks. The brokerage shared its view based on a comparison of the Nifty IT earnings yield with US 10-year bond yields starting from 2007.
Which sectors are companies are likely to benefit from rate cuts?
The manufacturing as well as communication, media and entertainment (CME) sectors are likely to benefit from a US Fed rate cuts, according to JM Financial. Tech Mahindra may benefit from its exposure to these sectors. TCS, Infosys and Wipro are likely to benefit from their exposure to the US banking sector, the Business Today reported citing a JM Financial brokerage report.
JM Financial has given a BUY call on Infosus, Wipro, and Tech Mahindra. It had given a hold call on HCL Tech and TCS while giving a Sell call on LTI Mindtree. To be sure, rate cuts may not transmit instantly to the corporate sector, said JM Financial. The brokerage has also given a BUY call on Persistent Systems and Coforge. Automobile engineering, research and development (ERD) stocks such as Tata Group-owned Tata Tech and KPIT Tech also received a BUY call from the brokerage.
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JM Financial gives BUY call on Infosys, Tech Mahindra and Wipro ahead of US Federal Reserve meeting outcome. Here’s why Markets Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
