Indian IT Stocks Tumble as US Recession Fears Escalate: Is There More Pain Ahead?
Indian IT stocks nosedive as US recession fears loom large
IT Stocks : The Indian IT sector witnessed a bloodbath on April 4, 2025, as key players like TCS, Infosys, and Coforge saw their shares tumble sharply amid renewed fears of a looming US recession. The Nifty IT index plunged 3.3%, touching a 9-month low of 33,663, marking its second consecutive session of heavy losses. With all constituents trading in the red, shares of Coforge led the fall with a steep 6% drop, followed closely by declines of over 2% each in Infosys, TCS, and HCL Tech.
This comes on the back of a 4.21% crash in the previous session, leading to a weekly loss of nearly 9% and an alarming 27% drop from the index’s December 2024 peak. The market is reeling from shockwaves triggered by US President Donald Trump’s aggressive tariff measures, which have raised serious concerns about global economic stability.
What’s fueling the sell-off?
President Trump recently announced reciprocal tariffs on 180 countries—including India—as part of his broader strategy to shrink the US trade deficit. These tariffs have heightened global investor anxiety, as they are expected to increase the cost of imported goods in the US, stoke inflation, and suppress consumer spending, which is the backbone of the American economy.
The impact was immediate: the S&P 500 dipped into correction territory, suffering its steepest one-day drop since June 2020, wiping out $2.4 trillion in market value. These losses reverberated globally, particularly in export-driven sectors like Indian IT, which rely heavily on US business.
Why Indian IT is taking a hit
Indian technology companies derive anywhere from 60% to 80% of their revenues from the US. With the American economy staring at a potential slowdown, investors are worried about a significant dip in tech outsourcing, project delays, and cautious client spending.
Initially, Indian IT firms had pinned hopes on the Trump administration’s business-friendly policies. But the sequence of tariff announcements and rising trade tensions have diminished those expectations. The sector now faces an uncertain future where deal-making could be delayed or scaled down.
Further complicating the outlook, global brokerage Morgan Stanley revised its forecast and no longer expects the US Federal Reserve to cut interest rates in 2025. Meanwhile, JP Morgan raised the recession probability to 60%, while Goldman Sachs and UBS have also issued bearish outlooks.
Financial Snapshot of Top IT Players
Here’s a look at some key financial metrics of the top Indian IT firms impacted by the sell-off:
| Company | Market Cap (₹ Cr) | Revenue (FY24, ₹ Cr) | Net Profit (₹ Cr) | P/E Ratio | ROE (%) | US Revenue Exposure (%) |
|---|---|---|---|---|---|---|
| TCS | 13,00,000 | 2,45,000 | 45,000 | 28 | 42.5 | ~60 |
| Infosys | 6,50,000 | 1,55,000 | 24,000 | 25 | 31.2 | ~63 |
| HCL Tech | 3,80,000 | 1,10,000 | 15,500 | 21 | 25.6 | ~66 |
| Coforge | 45,000 | 9,800 | 1,200 | 30 | 18.3 | ~75 |
| Wipro | 2,00,000 | 89,000 | 10,200 | 19 | 20.1 | ~58 |
Analysts turn cautious
Market experts are turning increasingly bearish on Indian IT. Morgan Stanley recently advised against “buying the dip,” citing weak deal pipelines, delayed decision-making, and macro headwinds. They also pointed to disappointing management commentary from global peer Accenture and flagged a conservative Q4 outlook for Indian tech firms.
Quarterly growth is expected to range between -0.9% to +0.4% in constant currency terms, a stark contrast to the optimistic start of FY25. As a result, the fiscal year 2026 revenue outlook now appears flat to mildly disappointing for most large-cap IT players.
What should investors do now?
While valuations have become more attractive following the recent correction, analysts warn that further downside remains possible if US economic conditions worsen. Long-term investors with a high-risk appetite may consider accumulating quality stocks like TCS and Infosys gradually. However, short-term traders should stay cautious, as volatility is expected to persist until there’s more clarity on US policies and the global economic outlook.
Conclusion
The Indian IT sector is currently navigating a perfect storm of global economic uncertainty, US policy volatility, and domestic growth concerns. While these companies have robust balance sheets and strong cash flows, their reliance on the US makes them vulnerable in the near term. Investors would be wise to tread carefully and stay updated on developments in the US economy.
FAQs: Understand the IT Sell-Off at a Glance
Q1. Why are Indian IT stocks falling?
A1. Indian IT stocks are dropping due to escalating fears of a US recession following tariff hikes by President Trump. The US is a key market for these firms, and an economic slowdown there could reduce tech spending.
Q2. How much revenue do Indian IT firms earn from the US?
A2. Between 60% and 80% of revenues for Indian IT companies like Infosys, TCS, and Coforge come from the US.
Q3. What triggered this market correction?
A3. The trigger was the announcement of reciprocal tariffs on 180 countries by the US, leading to fears of a global slowdown and a sharp correction in US indices.
Q4. Is it a good time to buy Indian IT stocks?
A4. Analysts suggest caution. While valuations are lower, earnings are likely to stay weak in the short term due to macroeconomic uncertainties.
Q5. What are analysts forecasting for Q4 results?
A5. Q4FY25 earnings for Indian IT firms are expected to be muted, with growth ranging between -0.9% and +0.4% in constant currency.
Q6. How bad could things get for the US economy?
A6. UBS predicts US GDP growth could fall below 1% in 2025 if tariffs continue, with a 30% chance of a full-blown recession.
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Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Investors should conduct thorough research and consult with a qualified financial advisor before making any investment decisions.