IT stocks tumble as outlook turns hazy

Information Technology stocks slumped by as much as 10% on Thursday amid renewed inflation concerns in the US, following President Donald Trump's announcement of long-anticipated reciprocal tariffs.

The Nifty IT index tumbled 4.2% — the biggest loser among sector indices. Shares of Persistent Systems plunged 10%, while Coforge dropped nearly 8%. TCS, Infosys, Wipro, Mphasis, LTIMindtree, and HCL Technologies declined between 3% and 4%.

As part of a sweeping overhaul of global trade policies, the US has imposed a 26% tariff on Indian goods, replacing a system that had been in place for over 75 years.
Although these tariffs do not directly impact the IT sector, they are expected to fuel inflationary pressures in the US and higher inflation could prompt American businesses to scale back spending, including cuts to technology and IT budgets.

«While Indian IT is not directly impacted by the tariff order, three factors will likely influence IT spending — higher US inflation, US GDP growth cuts, and crimping of corporate profits. This, combined with uncertainty, is negative for client decision-making and could result in a slower start to FY26, making a moderate improvement also challenging,» said Ashwin Mehta, Head of Equity Research at Ambit Capital. Indian IT companies account for 50-70% of their revenues from the US.

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Given that Indian IT firms generate a significant portion of their revenue from US clients, any reduction in tech expenditures could weigh heavily on their growth prospects.

Devarsh