Information technology (IT) stocks witnessed a sharp and broad-based sell-off on Friday, deepening concerns across the Indian equity market. Investors reacted swiftly to growing global uncertainty, sparked by former US President Donald Trump’s proposed tariff measures, which stoked fears of an impending slowdown in the world’s largest economy. While the benchmark Sensex and Nifty indices declined over 1% each, the NIFTY IT index nosedived 3%, closing at a 10-month low of 33,663.55.
The decline was particularly painful as every major IT stock ended in the red, reinforcing the sector's vulnerability to global macroeconomic headwinds. Heavyweight IT firms such as Tata Consultancy Services (TCS), Infosys, HCL Technologies, Wipro, and Tech Mahindra lost between 2.4% and 3.3%, wiping out significant market capitalisation in a single session.
So far in 2025, the NIFTY IT index has plummeted 22.3%, in stark contrast to the broader Nifty 50, which has declined by only around 3%. This underperformance underscores the pressure IT stocks are facing amid an increasingly cautious global tech spending environment.
Why Are IT Stocks Falling?
A combination of external shocks and sector-specific concerns have contributed to this steep decline:
1. Trump’s Tariff Shock
The announcement of new tariffs by the US, especially targeting imports and foreign-made automobiles, has unnerved global markets. With a potential return of protectionist policies, fears of a trade war and slower economic growth have resurfaced. Indian IT companies, which earn 60–70% of their revenue from the US, are seen as particularly vulnerable to a slump in client spending.
2. Rising Fears of a US Recession
There’s growing unease that the US economy could slip into recession, driven by tighter monetary conditions, persistent inflation, and reduced corporate spending. If American businesses tighten their IT budgets, Indian firms that depend on long-term outsourcing deals and new digital transformation contracts could face significant revenue headwinds.
3. Weak Demand and Delayed Deals
Analysts have flagged a clear slowdown in discretionary tech spending. Many clients are choosing to defer or cancel digital projects. As a result, Indian IT companies are witnessing longer deal cycles, increased pricing pressure, and subdued deal wins, especially in sectors like BFSI (banking, financial services and insurance), retail, and telecom.
4. Brokerage Downgrades
Adding to the pessimism, ICICI Securities downgraded multiple IT stocks, slashing growth projections and target prices. Notably:
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TCS: downgraded from “Buy” to “Add”
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Infosys: downgraded from “Buy” to “Hold”
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HCLTech: downgraded from “Hold” to “Reduce”
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Tech Mahindra: downgraded from “Add” to “Reduce”
The firm cited persistent revenue challenges, limited margin improvement, and weak visibility on deal closures as key reasons for its cautious stance.
5. JP Morgan’s Warning
Global investment bank JP Morgan also sounded alarm bells, advising investors to stay away from IT stocks for now. It predicted that major companies will offer cautious guidance for FY26, suggesting that a meaningful recovery in demand may take longer than expected.
Q4FY25 and FY26 Outlook – What to Expect?
HDFC Securities has released a detailed preview for Q4FY25 earnings and FY26 guidance of Indian IT majors, painting a mixed but largely cautious picture.
Expected Revenue Performance (Q4 FY25):
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Infosys: Revenue to fall 1.8% QoQ, the steepest among large players.
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TCS, HCLTech, Wipro, Tech Mahindra: Revenue likely to drop by 0.5% QoQ.
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L&T Technology Services (LTTS): Expected to see a 13.7% growth QoQ, aided by seasonality and acquisitions.
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Persistent Systems: Growth of 3.7% QoQ expected.
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Tata Elxsi, Birlasoft, Sonata Software: May report weak or flat results due to client-specific issues and delivery constraints.
FY26 Guidance Expectations:
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Infosys: 2–4% revenue growth
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HCL Technologies: 3–5% growth
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Wipro: Flat to marginal growth between -1% and +1.5% in Q1 FY26
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L&T Tech: Over 10% growth, including merger benefits
Margin Outlook:
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TCS: Operating margins expected in the 26% to 28% range
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Infosys: Margins likely to be 20% to 22%
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HCLTech: Expected margin band of 18% to 19%
Currency tailwinds, improved utilization, and better supply-side dynamics may offer some relief on the margin front.
Deal Pipeline and TCV Outlook
While quarterly growth remains muted, the deal pipeline continues to be closely watched. TCS is expected to report a Total Contract Value (TCV) of approximately $11 billion, though the absence of any major mega-deal announcements in recent months is weighing on near-term sentiment. Analysts believe that cost optimization deals, rather than growth-oriented ones, will dominate client conversations in the near future.
Bottom Line
The Indian IT sector, once seen as a defensive haven, is currently grappling with a perfect storm of external volatility, weak demand, and cautious spending by global clients. While long-term prospects remain intact due to secular trends like cloud adoption and AI integration, near-term challenges are likely to persist.
For investors, the key will be to stay selective, focus on companies with strong balance sheets and high client retention, and remain cautious until macro conditions stabilize. Unless clarity emerges around US economic health and a clear uptick in global tech spending is visible, the road ahead for IT stocks may continue to be bumpy.
