Indian technology (IT) stocks remained under selling pressure for the second consecutive session on Friday, with the Nifty IT index declining over 3.5%. Significant losses in leading IT stocks such as Tata Consultancy Services (TCS), Infosys, Wipro, HCL Technologies, and Coforge shares contributed to the index reaching its lowest level in nine months.
This downturn follows a 4.21% decline in the previous session, triggered by US President Donald Trump’s announcement of reciprocal tariffs on imports, including India, exacerbating concerns of a potential recession in the world’s largest economy.
US Tariffs and Their Impact on the IT Sector
On April 2, 2025, President Trump declared ‘Liberation Day’ and imposed a 26% tariff on Indian imports. Key sectors, including textiles, electronics, gems & jewelry, and engineering goods, now face rising cost pressures, intensifying fears over India’s global trade competitiveness.
The Indian IT sector has been underperforming, with the Nifty IT index declining over 27% from its peak and remaining weak for nearly six months.
Om Ghawalkar, Market Analyst at Share.Market, noted that while industries reliant on physical exports are directly affected, IT firms such as Infosys, Tata Consultancy Services (TCS), and HCL Technologies remain relatively insulated, as the tariffs target goods rather than services. However, he highlighted indirect risks, stating that rising inflation in the US could reduce discretionary IT spending by American companies, further straining an already weakened sector.
Analysts at Geojit Financial Services also underscored the indirect effects of US trade policies on Indian IT companies.
“The tariffs led to higher operational costs and global slowdown, leading to reduced spending on outsourced IT services, which could put pressure on revenue and margins. US BFSI clients, contributing ~60% of revenue, will face financial strain, leading to contract renegotiations, pricing pressures, and budget cuts. As a result, IT investments in new-age technologies are slowing, with projects postponed due to recession concerns,” Geojit Financial Services stated.
Given these headwinds, Indian IT firms are focusing on cost optimization, exploring new markets, and diversifying service portfolios to sustain growth amid a slowdown in large-scale deal signings.
The brokerage firm has listed out the key Indian IT companies with high exposure to the US in terms of revenues.
IT Stocks Analysis and Investment Recommendations
Ghawalkar assessed key Indian IT stocks based on five critical factors: Momentum, Value, Sentiment, Volatility, and Quality. Each stock was assigned a score out of 5 to help investors evaluate price trends, valuation, market perception, risk levels, and financial stability.
Infosys: Infosys share price exhibits moderate momentum (3/5), performing in line with the broader market. It is fairly valued (3/5), indicating a balanced price relative to its fundamentals. Infosys stock scores highly in quality (5/5), reflecting strong financial health and operational efficiency. The IT major also demonstrates low volatility (5/5), making it a stable investment. However, its sentiment score (2/5) indicates a bearish market outlook.
TCS: Despite being the largest IT services provider in India, TCS has shown weak momentum (1/5). Similar to Infosys, it is fairly valued (3/5) and maintains strong quality metrics (5/5). TCS share’s low volatility (5/5) ensures stability. However, investor sentiment remains weak (2/5), reflecting cautious market expectations.
Wipro: Wipro stock emerges as a relative outperformer with strong momentum (5/5), indicating an upward price trend. The stock is fairly valued (3/5) and holds a high-quality rating (5/5), underpinned by financial stability and operational efficiency. Low volatility (5/5) makes Wipro shares a reliable investment, while its sentiment score (4/5) suggests strong investor confidence.
HCL Technologies: HCL Tech’s momentum score (3/5) is comparable to Infosys, showing performance in line with the broader market. The stock remains fairly valued (3/5), with strong financial health and operational efficiency reflected in its quality score (5/5). It also maintains low volatility (5/5). However, a sentiment score of 2/5 highlights short-term investor caution.
“As India continues trade negotiations with the U.S., the long-term outlook for the IT sector remains uncertain. While large-cap IT stocks offer stability, investors may consider selectively exploring mid-cap opportunities for growth,” Ghawalkar said.
Long-Term Investment Outlook
Chirag Kachhadiya, Senior Research Analyst at Ashika Stock Broking, acknowledged that while Indian IT firms may not face direct repercussions from US tariffs, restrictive trade policies affecting other industries could indirectly impact technology spending.
From a long-term perspective, he recommends TCS as a stock to buy, noting that the TCS share price has corrected by 20% over the past four months, making its valuation more reasonable, although not inexpensive.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
