Israel-Iran war: Birlasoft, Cyient to FSL — IT stocks nosedive amid hawkish US Fed guidance

Israel-Iran war: Shares of IT companies fell sharply in Thursday's trading session as the US Federal Reserve kept the key interest rates unchanged in its June policy meeting, while raising concerns on inflation, and amid worries following the Israel-Iran war.

While the US Fed held interest rates unchanged for the sixth consecutive meeting, it reaffirmed expectations for two rate cuts in 2025, as shown in the updated "dot plot," which outlines forecasts from individual policymakers. However, the Fed lowered its projected rate cuts for 2026 and 2027, indicating a slower pace of monetary easing in the longer term.

The US Fed remains in a wait-and-watch mode as it expects the impact of the tariffs imposed by Donald Trump to start showing over the summer. 

US Fed Chair Jerome Powell cautioned that inflation could accelerate over the summer as the effects of President Donald Trump’s tariffs begin to hit US consumers more directly. The Fed has revised its GDP growth forecast for 2025 to 1.4%, down 0.3 percentage points from its March projection, which does not bode well for Indian IT companies, which derive a major chunk of their revenue from the US. 

After the announcement, Indian IT stocks faced selling pressure. The steep decline in IT stocks dragged the Nifty IT index down by almost 1 per cent during early trading.

IT stocks decline

Cyient share price saw a significant fall of over 4 per cent to ₹1,287 on June 18. Meanwhile, shares of Birlasoft and Firstsource Solutions also declined between 2-3 per cent.

Other IT companies like Tech Mahindra, Infosys, LTI Mindtree also saw their shares trade lower by around 2%. Tech Mahindra dropped close to 3 per cent, while OFSS, Persistent Systems, Coforge, Mphasis, and Infosys registered losses ranging from 1 per cent to 2.6 per cent.

However, IT giant Wipro and Brightcom Group shares defied the overall market trend and traded higher.

“The US Fed meeting outcome to keep the interest rates unchanged is on the expected lines, but its guidance for two interest rate cuts in 2025 is good news for Indian IT companies. However, this is insufficient to clear the uncertainty caused by the Israel-Iran war. Therefore, we are witnessing selling pressure in the Indian IT companies,” said Sandeep Pandey, Co-founder of Basav Capital.

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