IT Index In Bear Territory: IT Stocks Sink Up To 43%; Should You Buy The Fear? – News18
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India’s IT sector faces pressure from Trump tariffs, US recession risks, weak earnings, and broker downgrades.
IT Stocks Fall: Infosys, Wipro, TCS Affected by Trump’s Tariff Concerns
IT Stocks Fall: India’s IT sector has encountered a hurdle, with stocks experiencing a stark decline recently. The challenge is put forth on several prongs – from rising US recession fears triggered by Trump-era tariffs to weak earnings projections and a flurry of broker downgrades.
All 10 stocks in the Nifty IT index have fallen into bear territory—dropping more than 20% from their peaks. Major companies like TCS (-26%), Infosys (-25%), and HCL Tech (-27%) are among the hardest hit. Oracle Financial Services Software (OFSS) has taken the biggest hit, plummeting 43%. The Nifty IT index itself has declined about 23% from its highs, making the IT sector the most significant casualty in India’s stock market downturn this year.
IT Sector Faces Growing Headwinds as Brokerages Slash Targets Ahead of Q4
The outlook for India’s IT sector has darkened further, with brokerages downgrading stocks and slashing target prices ahead of the Q4 earnings season. Analysts cite weakening US demand, global macroeconomic uncertainty, and the indirect fallout from former President Donald Trump’s sweeping tariff hikes as key factors driving the pessimism.
“We continue to maintain a ‘downgrade’ stance on the IT sector,” said Axis Securities in a recent note. “The slowdown in US IT spending, particularly in discretionary areas, poses a material downgrade risk for upcoming quarters. With the added uncertainty from Trump’s tariff announcements, the pressure on sector valuations has intensified. We recommend reducing exposure to IT stocks in the near term.”
Tariffs: No Direct Blow, But IT Still Vulnerable
While India’s IT services exports have largely avoided direct tariff hits—the 26% duty largely targets physical goods—analysts warn that the sector is far from immune. The broader concern is the potential for a US economic slowdown, which could curtail enterprise IT budgets.
“The real impact will come through weaker discretionary spending, which could affect IT firms in the medium term if the trade conflict escalates,” said Venugopal Garre of Bernstein.
Jefferies echoed these concerns, noting that although Indian IT firms are not directly affected by tariffs, the resulting drag on US GDP could soften demand for outsourcing services. “Verticals like manufacturing, logistics, and retail are likely to feel the heat. Among the large caps, Tech Mahindra and HCL Tech are relatively better positioned due to favorable sector exposure,” the firm noted. “In the midcap space, IKS and Sagility could be more resilient.”
Q4 Earnings Season: Bracing for Weak Results
With TCS set to kick off the Q4FY25 earnings season on April 10, expectations are low. Analysts forecast sequential revenue declines, cautious guidance, and muted commentary from management across the board.
“All large-cap IT firms are likely to report revenue declines in Q4FY25 due to seasonal weakness, fewer billing days, and continued macro uncertainty,” said Kotak Institutional Equities.
Motilal Oswal added that the modest discretionary recovery seen in the first half of FY25 has now stalled. “Clients appear to be in a wait-and-watch mode amid trade tensions, a slower-than-expected Fed rate cut cycle, and ongoing macro concerns,” the firm noted.
BNP Paribas took a more bearish tone, warning that worsening US economic indicators could push FY26 IT growth forecasts even lower. “The risk of stagflation or even recession in the U.S. is rising. As a result, expectations for discretionary IT demand are being revised downward. FY26 revenue growth is now expected to trail FY25, although we see some recovery potential in 2HFY26 if global tax reforms help revive sentiment,” it stated.
Wave of Downgrades: Is a Bottom in Sight?
A flurry of downgrades has followed the sector’s recent underperformance. JP Morgan downgraded HCL Tech on the back of disappointing Q4 results and tepid deal momentum, while Axis Securities downgraded the broader sector, pointing to heightened risk from protectionist trade policies.
HSBC upgraded Tech Mahindra to Hold, citing some resilience in its verticals, but remained largely cautious on peers. BNP Paribas slashed its FY26–27 earnings estimates for the sector by 1.5–10%, citing subdued near-term demand.
While some analysts believe the recent cuts may be overly bearish, consensus remains that the IT sector will need to navigate a tough macro environment before meaningful recovery begins.
Disclaimer:Disclaimer: The views and investment tips by experts in this News18.com report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decisions.
