The shares of Indian IT companies fell on Friday, as investor sentiment shifted to a cautious one due to concerns about a slowing US economic growth and rising inflation expectations. This was exacerbated by the tariff policies of former US President Donald Trump.
The Nifty IT index fell over 4% with major IT companies suffering sharp losses.
Tech Mahindra was the worst hit, with a drop of nearly 6%. Mphasis Persistent Systems Wipro LTIMindtree and Infosys all fell between 4 to 5%.
Tata Consultancy Services, HCL Technologies and Coforge, all heavyweights in the industry, also fell by 3-4%.
Economic uncertainty is heightened by US jobless claims
The sell-off was triggered after the US Labor Department released new data that showed an unexpected spike in initial claims for unemployment benefits.
For the week ending February 22, claims increased by 22,000, bringing the total to 242,000 (seasonally adjusted), the biggest increase since October.
Analysts attributed the increase to snowstorms and President’s Day, but there are concerns that more layoffs may occur in the coming week, further worsening the economic situation.
This development adds further to the concerns that the US economic momentum is losing steam, which could affect spending by major clients for Indian IT firms.
Fears of lower technology expenditure by businesses and financial institutions are raised due to a weaker economic outlook for the US, which is the largest market in the world for Indian IT services.
Analysts remain cautious about IT sector growth
Analysts at Kotak Institutional Equities warn that Trump’s policies continue to create volatility, despite the fact that the uncertainty surrounding the US Presidential election has eased since the results.
Analysts at Kotak Institutional Equities say that client conversations to date have not indicated a material change in spending priorities for tech due to the perception of increased uncertainty under the Trump Administration.
They warned that there are still downside risks due to the slower recovery of spending and the impact of artificial intelligent adoption on traditional IT services in the near term.
“The slower spending recover and near-term risks from AI adoption lead down to downside risks in revenue growth, margin estimates and stock multipliers. The weak business growth leads us to keep a cautious outlook on engineering research and development (ERD) firms despite the 18-36% decline in stock prices over the past year,” said the brokerage firm in an IT sector report.
Analysts at JM Financial Institutional Securities have also noted a growing level of uncertainty in the sector.
In our recent interactions, we have noticed sporadic instances where large US banks have paused their transformation programs. If this spreads, it could put Street’s and our FY26 growth estimates in danger,” the brokerage firm said in a report.
Global tech sell-off leads to broader market declines
The Indian market as a whole also suffered significant losses.
The BSE Sensex fell 1,000 points, or 1.34% to 73.602, while Nifty50 fell to 22.270. The total market capitalisation of BSE listed firms fell by Rs 7.16 lakh to Rs 385.94 million.
The MSCI Asia ex Japan index fell 1.21% in line with Wall Street’s losses.
The sharp drop in Nvidia shares following its earnings report led to a sell-off of AI-driven tech stocks and mega-cap stocks, further dragging IT stocks down worldwide.
Dr. V K Vijayakumar is the Chief Investment Strategist of Geojit Financial Services. He said: “Stock market dislikes uncertainty and uncertainty has increased since Trump was elected US president.” The recent tariff announcements from Trump have had a significant impact on the markets. The latest announcement of a 10% additional tariff on China confirms the market view that Trump would use the first months of his presidency as a threat to other countries and then negotiate a settlement that is favorable to the US.
He said that it remains to be seen how China will respond to the latest round tariffs.
Indian IT companies could continue to be under pressure in the short term, as US economic data continues to show signs of weakness, and global markets remain volatile.
This post Indian IT stocks plummet as US slowdown fears increase, Trump’s tariff policy adds pressure may be modified based on updates.
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