The Nifty IT is up 2% today but April has been a rollercoaster month so far. US President Donald Trump’s tariff announcements, followed by a confusing pause-and-play strategy left the markets in a tizzy and the tech sector with exposure to the global upheavals felt the heat. The Nifty IT index has nosedived over 8% in just five sessions, as global uncertainty, weak sentiment, and looming recession fears grip the sector. With Trump’s tariff confusion rippling across continents and Q4 earnings failing to offer much comfort, Indian IT stocks are caught in the crossfire.
Here are the three big worries for the tech sector-
US Tariff turmoil and recession fears
It all started with Donald Trump’s dramatic announcement on April 2, calling it “Liberation Day”. He introduced a fresh round of “reciprocal tariffs”, with some rates going up to 125% for Chinese imports and a new 10% minimum tariff for most others. While a partial 90-day pause was announced on April 9 for select countries, the uncertainty has not eased much.
But, this tariff conundrum has crafted a cautious note across the globe market and sometimes with no idea of what to expect the next. But why does this matter for Indian IT? Because the US is the largest client for Indian software services. Higher inflation, combined with tariff-induced trade tensions, could squeeze US tech budgets and outsourced contracts could be the first to face cuts.
Global analysts, including those at Bernstein, have already flagged the risk of an “inflationary shock” in the US economy.
Pentagon cancels $5.1 billion in IT contracts
In a separate but equally alarming development, US Defense Secretary Pete Hegseth recently terminated $5.1 billion worth of IT services contracts with consulting giants like Accenture and Deloitte. The reason: these were deemed “non-essential spending on third-party consultants.”
This move also indicates a shift in US government policy towards insourcing tech services, a strategy that could have ripple effects on large-scale outsourced IT deals, including those awarded to Indian firms.
Weak Q4 earnings and valuation worries
Back home, Indian IT companies are bracing for a tepid earnings season. TCS, for instance, reported a 2% YoY drop in net profit in Q4 FY25, missing analysts estimates. Infosys is expected to guide for a modest 1-3% revenue growth in FY26, nearly flat compared to FY25.
According to Elara Securities, IT companies are running out of levers to protect margins. With pricing pressure, high employee utilisation, and low attrition, firms are stuck in a corner. Kotak Institutional Equities has even warned of a possible 18-35% further downside in tech stocks, especially if a US recession hits.
The valuation risk is real. While companies like TCS, Infosys, and HCL Tech are somewhat insulated, others like LTIMindtree, Tech Mahindra, and Coforge are more exposed due to higher reliance on discretionary tech spends, retail and manufacturing clients, and company-specific concerns.
Nifty IT: How bad is the fall?
It is not just the past week. The Nifty IT index has been under pressure for a while. The Nifty IT index fell 8% in the past five sessions, 12% over the last month, and 22% in the past six months. On a one-year basis, the index is down 6%, and year-to-date in 2025, it has plunged 24%.
Although the Nifty IT index saw a brief bounce today, up nearly 2%, the undercurrents remain weak. TCS may have slipped after its Q4 miss, but stocks like Coforge and Mphasis are trying to fight back with gains of 3%.
Still, with global uncertainties, weak earnings, and rising risks, tech stocks may not be out of the woods just yet.