Indian IT Stocks Slide Amidst US Tariff Concerns: Infosys, TCS & HCL Stocks Among Others in Focus Today
Indian information technology (IT) stocks experienced a substantial decline in market capitalisation, shedding over ₹1 lakh crore on Thursday. This downturn was primarily triggered by concerns surrounding potential economic repercussions stemming from US President Donald Trump's announcement of a new tariff regime.
Mid-Cap IT Companies Drive Down Broader Market
The fall was broad based in the IT sector, led by mid-cap companies like Persistent Systems Ltd., Coforge Ltd. and Mphasis Ltd. The shares of Persistent Systems lost more than 9% intraday with volumes that were twice its 30-day daily moving average. Coforge and Mphasis also fell sharply, 7.75% and 3.95% respectively in the session.
In comparison, the larger IT players, including Tata Consultancy Services Ltd., HCL Technologies, Infosys Ltd., and Wipro Ltd., also saw their shares fall by over 4%. The stocks of TCS declined by 3.95%, HCL Technologies declined by 3.79%, Wipro declined by 2.62%, Infosys declined by 3.45%. The overall impact on the sector was evident in the Nifty IT index, which plummeted by 4.25%, reaching a nine-month low. This contrasted sharply with the broader market, as the benchmark Nifty 50 index only saw a fall of 0.35%
Indirect Impact of US Tariff Policy
The trigger for this market response was President Trump’s imposition of a 10 percent baseline tariff on all imports to the US, with even higher duties set to be imposed on some of its biggest trading partners. The tariffs are scheduled to go into effect on April 9. The new policy imposes a 26% tariff on Indian goods, in particular. It is much higher than the old US tariff rate of 3% on Indian products and much higher when India's weighted average tariff rate on US imports is 12%.
Although the IT sector is not directly affected by this tariff order, analysts see indirect repercussions as the higher tariffs could lead to a slower US GDP growth. This economic slowdown, in turn, may affect demand for IT services from leading industries such as manufacturing, logistics and retail. The Indian IT sector's fortunes are intimately linked with the US macro environment, where discretionary spending by American firms is a key demand driver for IT services. Some even foresee a US slowdown or recession, which would definitely hit Indian software exporters.
In the midst of this market turbulence caused by trade policy shifts, it is noteworthy that pharmaceutical stocks, represented by Sun Pharma and Dr. Reddy's, refused to comply with the trend and supported the Nifty.
Disclaimer: This is not a recommendation to buy or sell a stock.
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