Here are 5 IT stocks that you can still bet on despite US recession fears

Sumit Pokharna, vice president for fundamental research at Kotak Securities suggests five IT stocks that investors can still bet upon from a long-term perspective

Indian IT stocks witnessed heavy selling on Thursday, April 3, after US President Donald Trump announced "reciprocal tariffs" on its key trading partners with an aim to address trade imbalances and boost manufacturing in the United States.

 

However, fearing higher inflation and slower economic growth in the US, investors dumped technology stocks in India, a sector that has a significant exposure to the US. The Nifty IT index fell nearly 5 per cent to hit the day's low of 34,642.40. All 10 constituents of the Nifty IT index were trading in deep red, falling up to 10 per cent.

 

Among individual stocks, Persistent Systems, Coforge, LTIMindtree, Mphasis and Infosys were the hardest hit, plummeting in the range of 4 per cent to 10 per cent on the National Stock Exchange (NSE). 

 

While the levy of tariffs across more than 180 countries, including India, will likely have far-eraching negative consequences for global and the US gross domestic product (GDP) growth, global and US inflation, and the profitability of certain sectors and companies in India in the near-term, investors' focus will soon turn squarely to a string of key technology earnings, analysts said.   ALSO READ | Pharma stocks that you can keep in your portfolio despite US tariff woes

 

Given this, Sumit Pokharna, vice president for fundamental research at Kotak Securities, suggests analysts bet of IT stocks, including Infosys, TCS, TechM, Coforge, and Indegene, from a long-term perspective. 

 

On Thursday at 1:30 AM IST, Trump announced reciprocal tariffs on its key trading partners including India, China, Brazil, Japan, the European Union (EU). The US President said the reciprocal tariffs aim to promote manufacturing in the US and provide its citizens a level playing field against other countries. Trump has imposed 27 per cent reciprocal tariffs on all goods and services imported to the United States from India.   ALSO READ | Infosys, TCS: Nifty IT slips 3% amid recession fears as US imposes tariff

 

However, there is no specific tariff that has been imposed on IT services. The only fallout of tariff threats by the US is a slowdown and uncertainty in spending.  On its part, the Nifty IT Index has corrected 20 per cent in the last three months due to concerns around recession in the US and tariff war. 

 

That said, in the near-term, the notable weakness in the US economy in recent months will lead to deterioration in the macro environment. This, Pokharna said, will weigh on the March quarrter earnings of the financial year 2024-25 (Q4FY25) and FY26 earnings guidance.

 

"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," he said.  ALSO READ | Portfolio rejig? What Trump's tariff order means for your investments

 

Pokharna added: Any imposition of retaliatory tariffs on US exports by the US' trading partners could add to global inflation. Higher tariffs may result in higher inflation as against the 2-per cent target of the US Federal Reserve and may impact the Fed's rate cut decision, which is not conducive for the IT sector.