Shares of Indian IT companies plunged on Friday as investor sentiment turned cautious over concerns about a slowing US economy and rising inflation expectations, exacerbated by former US President Donald Trump’s tariff policies.
The Nifty IT index shed over 4%, with major IT players witnessing sharp losses.
Tech Mahindra (NSE:TEML) led the declines, slipping nearly 6%, while Mphasis (NSE:MBFL), Persistent Systems (NSE:PERS), Wipro (NSE:WIPR), LTIMindtree (NSE:LTIM), and Infosys (NSE:INFY) fell between 4-5%.
Heavyweights Tata Consultancy Services (NSE:TCS), HCL Technologies (NSE:HCLT), and Coforge (NSE:COFO) were also down by 3-4%.
US jobless claims add to economic uncertainty
The sell-off was triggered by fresh data from the US Labor Department, which showed an unexpected spike in initial jobless claims.For the week ended February 22, claims rose by 22,000 to a seasonally adjusted 242,000, marking the largest increase since October.
While analysts attributed the rise to snowstorms and the President’s Day holiday, concerns remain that further layoffs could emerge in the coming weeks, worsening economic conditions.
This development adds to broader concerns that the US economy is losing momentum, which could impact spending by major clients of Indian IT firms.
A weaker economic outlook in the US, the largest market for Indian IT services, raises fears of lower technology spending by businesses and financial institutions.
Analysts remain cautious on IT sector growth
While the uncertainty surrounding the US presidential election had eased following the results, analysts at Kotak Institutional Equities warned that Trump’s policy decisions continue to create volatility.Client conversations till now do not indicate a material shift in tech spending priorities due to the perception of higher uncertainty under the Trump administration, analysts at Kotak Institutional Equities said.
However, they cautioned that downside risks remain due to slower recovery in spending and the near-term impact of artificial intelligence adoption on traditional IT services.
“The slower spending recovery and near-term risk from AI adoption lead to downside risks to revenue growth and margin estimates and stock multiples. The weak business momentum leads us to maintain a cautious view on engineering research and design (ERD) companies despite the ~18-36 per cent decline in stock prices in the past year,” the brokerage firm said in an IT services sector report.
Meanwhile, JM Financial (NSE:JMSH) Institutional Securities analysts flagged growing uncertainty in the sector.
“In our recent interactions with IT services players, we picked up sporadic instances of pause in transformation programs by large US banks. This, if it spreads, could put Street’s (and ours) FY26 growth estimates at risk,” the brokerage firm in a sector report.
Broader market declines amid global tech sell-off
The broader Indian market also faced significant losses.The BSE Sensex dropped 1,000 points, or 1.34%, to 73,602, while the Nifty50 fell to 22,270. The overall market capitalisation of BSE-listed firms shrank by Rs 7.16 lakh crore to Rs 385.94 lakh crore.
Adding to the pressure, global markets followed suit, with the MSCI Asia ex-Japan index declining 1.21%, tracking losses on Wall Street.
A steep fall in Nvidia’s shares after its earnings report triggered a sell-off in AI-driven and mega-cap tech stocks, further dragging down IT stocks worldwide.
Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said, “Stock markets dislike uncertainty, and uncertainty has been on the rise ever since Trump was elected the US president. The spate of tariff announcements by Trump has been impacting markets and the latest announcement of an additional 10% tariff on China is a confirmation of the market view that Trump will use the initial months of his presidency to threaten countries with tariffs and then negotiate for a settlement favourable to the US.”
“How China responds to the latest round of tariffs remains to be seen,” he said.
With US economic data showing signs of weakness and global markets remaining volatile, Indian IT companies may continue to face pressure in the near term.