Shares on the IT index saw continued selloff, including leading names like TCS and Infosys, as well as others midcap names on April 4, as US President Trump's reciprocal tariffs sparked worries over slowing client spends and US consumption. Trump's drastic trade tariff announcements are adding to the uncertainty over revenue outlook of Indian IT players from US clients, as well as fears of worsening of demand.
The shares of Coforge plunged nearly 7 percent, while Mphasis shares closed nearly 6 percent lower. LTI Mindtree shares tumbled over 4 percent, while those of Wipro and Tech Mahindra closed over 3 percent lower. Infosys, HCL Tech, TCS and Persistent shares meanwhile closed nearly 3 percent lower.
The sharp fall in IT stocks pushed the Nifty IT index lower by nearly 4 percent to end the session at 33,511.40.
International brokerage Jefferies has said that there may be indirect impacts on the IT industry from slower GDP growth due to higher tariffs despite potentially lower rates in the future. It further said that the demand from Manufacturing/Logistics and Retail verticals will get impacted due to higher tariffs, while demand from verticals such as Healthcare, Hitech, Utilities and Communications will be less impacted.
"TechM/HCL Tech among largecaps and IKS/Sagility among midcaps have a favorable vertical exposure," it further said.
"We expect a sequential revenue decline for all large Indian IT service companies for the March 2025 quarter due to seasonal weakness, lower billing days, and marginal deterioration in demand," Sumit Pokharna from Kotak Securities said, while adding that there are no specific tariff imposed on IT services.
"The fallout of tariff threats by the US is a slowdown and uncertainty in spending," Pokharna said, adding that any counter-measures by US trading partners could add to global inflation.
"Higher tariffs may result in higher inflation (versus the 2% target of the US Fed) and may impact the Fed’s rate cut decision which is not conducive for the IT sector, in general," Pokharna added.
Vaibhav Porwal, Co-Founder of Dezerv said export-driven sectors like IT and auto components face significant challenges due to direct exposure to tariff impacts and trade friction.
"In this market environment, gains will likely be concentrated in select stocks rather than broadly distributed, making careful stock selection and active management strategies more effective than passive approaches," Porwal added.
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