Mumbai Stock Market Plunges as Nifty IT Index Suffers 3% Drop Amid US Fed Rate Cut Speculation

In a sharp correction, the Indian stock market suffered a significant setback today, with the Nifty IT index experiencing its largest single-day slump in weeks, falling over 3%. The plunge comes amid growing expectations that the US Federal Reserve has slowed down its pace of interest rate cuts.

The Bombay Stock Exchange (BSE) and National Stock Exchange India Limited (NSE), two of India's leading stock exchanges, reported sharp losses in their respective indices. The BSE Sensex closed at a loss of 2.5%, while the Nifty 50 benchmark index declined by over 1.8%.

Industry analysts attributed the sell-off to investors' concerns that a slowdown in US interest rates may curtail demand for Indian software and IT services exports, which have been driving growth for the sector.

"This has impacted our stocks heavily," said Anand Rathi, CEO of brokerage firm Anand Rathi Financial Services Ltd. "Many of our tech clients are closely linked to the US economy. If there's a change in interest rates, it could have a ripple effect on their business operations and revenue."

Ratings agency ICRA on Monday downgraded its forecast for India's IT-BPO sector growth rate to 7-8% in FY25 from 9-10% earlier. "The downgrade was made for the slowdown of the US Fed funds rates by 50 basis points, which will lead to a moderate decline in the Indian currency," said Saurettra Chhaya, Group Head (Industry Research), Ratings.

On the global front, the S&P Global 500 index closed down 0.6%, while the NIKKEI 225 benchmark index fell by 1.5%. European indexes also slid, with the STOXX Europe 600 index declining by 1.4%.

The Indian rupee was trading slightly higher against the US dollar today, at around 76.75 per USD.

In related news, shares of several Indian IT majors - such as Tata Consultancy Services Ltd (TCS) and Infosys Ltd - fell sharply in early trade before recovering some losses later in the day.

As markets continue to watch the Fed's monetary policy announcements for their next scheduled meeting on December 12-13, investors will be keenly monitoring every move with potential implications for global interest rates and economy.