Nifty IT index slips 2% on US recession concerns; Infy, Wipro down up to 4%

US markets ended sharply lower on Monday as fear mounted that the US economy could be careening into a recession. Nasdaq Composite plunged 4 per cent

Shares of information technology (IT) companies were under pressure on Tuesday with the Nifty IT index falling 2 per cent to 36,826.90 on the National Stock Exchange (NSE) in the intraday trade on concerns that the US economy may fall into a recession by the year-end amid President Donald Trump's tariff war with trading partners.

 

Overnight, US stock markets ended sharply lower on Monday, as fear mounted that the US economy could be careening into a recession. Tech-heavy Nasdaq Composite dropped 727.90 points, or 4.00 per cent, to 17,468.32. This was the index's worst session since September 2022.

 

The Dow Jones Industrial Average, meanwhile, fell 890.01 points, or 2.08 per cent, to 41,911.71, and the S&P 500 lost 155.64 points, or 2.70 per cent, at 5,614.56.

 

 

Back home, at 10:41 AM, the Nifty IT index traded as the top loser among sectoral indices, and was down 1.6 per cent on the National Stock Exchange (NSE), as compared to 0.15 per cent decline in the Nifty 50.  Infosys, Wipro, Tech Mahindra (TechM), and Coforge were down in the range of 2 per cent to 4 per cent.  Tata Consultancy Services (TCS), LTIMindtree, and Mphasis, on the other hand, were down 1 per cent and were trading close to their respective 52-week lows on the NSE.  ALSO READ: IndusInd Bank stock outlook: Chart shows 30% fall, can slip to Rs 500-mark

 

Thus far in calendar year 2025, the BSE IT index has underperformed the market by falling 16 per cent as against 5.9 per cent decline in the BSE Sensex.

 

"President Trump's flip-flop tariff policy and the high uncertainty that it has triggered, has started impacting US stock markets. Yesterday was the market's response to Trump's tariffs and the possibility of the US recession by the year-end. We will have to wait and watch how the situation develops," said V K Vijayakumar, chief investment strategist, Geojit Financial Services.

 

A significant consequence of the ongoing market correction is that India is now outperforming the US. During the last one month, while the S&P 500 is down 7.5 per cent, the Nifty is down only 2.7 per cent. More importantly, the dollar index is down from 109.3, when Trump assumed presidency, to 103.71 now. If this trend continues, it will be good for emerging markets like India. Capital outflows from India will decline, he added.

 

Meanwhile, most IT players had echoed cautious optimism in their December 2024 quarter (Q3FY25) commentary. They cited improvement in short duration deals and continued discretionary spend in BFS. Further, part of the optimism was predicated on reducing uncertainty as the new US administration took office.

 

"Anything but that has happened since. Tariffs and counter tariffs have infused more uncertainty. Inflation and rate cut trajectories have worsened," said analysts at JM Financial Institutional Securities in an IT sector report. 

 

The brokerage firm noted that most analysts picked up sporadic instances of pause in transformation programs by large US banks. "This, if spreads, could put Street's (and ours) FY26 growth estimates at risk. Our estimates and target prices are unchanged for now as we seek more evidence. But we will advise flight to safety, that is, stocks with earning resilience and valuation buffer," the brokerage firm said.

 

JM Financial Institutional Securities has 'Buy' ratings on TCS, Infosys, Wipro and TechM, and 'Hold' rating on HCL Technologies.

 

In Q3FY25, most of the largecap IT companies saw mid-single digit revenues growth year-on-year (Y-o-Y) in constant currency terms. The margins, however, witnessed an average expansion of ~50 bps sequentially (aided by currency tailwinds and better utilisation), which led to healthy profit after tax (PAT) growth Y-o-Y, ICICI Securities said.

 

The brokerage firm highlights that tier-1 IT players have indicated a better FY26, compared to FY25, led by some discretionary demand pick up. Nonetheless, they remain selectively positive in tier 2/3 names which offer higher growth prospects.