Rate Expectations Rebooted: Tech Stocks Tumble as Fed Cools the Cut Talk—India Feels the Ripple

Updated: November 07, 2025 05:46

Image Source: Mint

Global tech stocks led a sharp decline in US markets as fading hopes for further Federal Reserve rate cuts rattled investor sentiment. Major players like Nvidia and Tesla saw steep losses. The downturn has implications for Indian IT firms, with analysts warning of valuation pressure and cautious foreign fund flows.

From Silicon Surge to Sentiment Slump: Fed’s Hawkish Tone Sends Tech Stocks Sliding

Wall Street’s tech-heavy indices took a hit this week as Federal Reserve Chair Jerome Powell signaled caution on further rate cuts, despite persistent inflation concerns. The Nasdaq dropped 1.4%, with Nvidia, Tesla, Amazon, and Palantir Technologies leading the sell-off. The ripple effect was felt globally, including in Indian IT stocks, which saw declines amid valuation worries and foreign fund outflows.

📉 Key Market Movements and Strategic Insights:

Tech Stocks Lead the Decline

US tech giants saw sharp corrections, with Palantir falling 7% despite beating earnings estimates.

AI-driven stocks faced scrutiny over overvaluation and copyright risks, dampening investor enthusiasm.

Fed’s Mixed Signals on Rate Cuts

While the Fed cut rates by 25 bps to 3.75%–4.00%, Powell stressed that another cut in December is “far from certain”.

This tempered expectations for a dovish stance and triggered a risk-off sentiment across markets.

Impact on Indian Tech Firms

Indian IT stocks like LTIMindtree, Tech Mahindra, Infosys, and Coforge declined as global sentiment soured.

Analysts warn of earnings pressure, especially for firms heavily dependent on US clients and contracts.

Foreign Fund Flows Turn Cautious

The hawkish Fed tone may lead to slower foreign institutional inflows into Indian equities, particularly in tech and mid-cap segments.

Currency volatility and inflation risks could further impact investor appetite.

Valuation Reset Underway

With AI stocks facing scrutiny, Indian tech firms may undergo a valuation correction, aligning more closely with fundamentals.

This could benefit long-term investors seeking value over hype.

Broader Market Sentiment

Asian and European indices also saw declines, reflecting global unease over monetary policy uncertainty and tech sector fragility.

Indian markets are bracing for a volatile opening, with cautious optimism around domestic resilience.

As the Fed recalibrates its stance, tech investors worldwide are adjusting their expectations. For Indian IT firms, the message is clear: brace for turbulence, but stay focused on fundamentals.

Sources: Times of India, News18

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