Shares of information technology (IT) heavyweights such as Tech Mahindra, TCS, Infosys, and Wipro witnessed sharp selling on Thursday after U.S. President Donald Trump announced reciprocal tariffs across as many as 180 countries globally. The sentiment was further dented after U.S. futures, including Nasdaq-100, the Dow Jones Industrial Average, and S&P 500, fell up to 4.5% amid concerns that aggressive tariffs would severely hinder global economic growth, hurt corporate profits, spike inflation, and intensify existing trade conflict.

At 11:25 AM, the BSE Sensex and NSE Nifty were down 0.35%, largely due to broad-based selling across IT space, with the BSE IT index falling up to 3.6%. The   bluechip IT stocks TCS, Tech Mahindra, Infosys, Wipro, and HCL Tech falling between 3-4%.

Tata Consultancy Services (TCS), the country’s most valued IT stock, declined as much as 3.6%, while Infosys, the second largest software exporter, dropped up to 3.3% in the first two hours of trade so far.

Among others, Tech Mahindra, HCL Tech, Wipro, and LTIMindtree shares were down up to 3%.

On the other hand, midcap IT stocks such as Persistent Systems, Coforge, Mphasis and KPIT Tech were worst hit, falling between 4% to 9%.

What fuelled sell-off in IT stocks?

IT sector fortunes are highly linked to the U.S. macro-environment, which has started showing signs of a slowdown, raising the risk of a stagflation at best and a recession at worst. In the recent time, overall IT sector, a key market driver, has witnessed weaker deal momentum and cautious client spending amid slower global economic growth, supply chain disruptions, and pricing pressures. This has badly impacted their margins and profitability.

Domestic brokerage BNP Paribas Securities India expects a flat to 1% quarter-on-quarter decline in constant currency revenue growth in Q4 FY25. “We see our mid-cap coverage delivering stronger growth, led by Persistent Systems. We expect EBIT margin to remain largely flattish q-o-q for most of our coverage, while some firms may see a compression on account of deal ramp downs and wage hikes. We see companies building some caution in their FY26 guidance,” it said in a note.

Another brokerage house HSBC Global Research expects March quarter earnings to a weak, impacted by usual seasonality and sustained weak Europe performance and now uncertain U.S. results. “Reported dollar growth is likely to be in the range of -1% to 0% q-o-q, also impacted by cc headwind in the range of 0 to 150bp. Margins are likely to be better with currency tailwind (net of rupee weakness and cc headwinds) and seasonal decline in pass-through revenues across many companies.”

“The macro outlook (both in the U.S. and Europe), GCC competition and GenAI impact on demand and pricing will be key topics of discussion,” it added.

For FY26, HSBC projected a 4-5% growth across large companies, led by a low base of two years and stability in the macro outlook in the U.S. and European market through the year. “Given 4-5% dollar growth and 3-4% INR depreciation, we expect 7-9% EPS growth over FY25-27. Valuations are still at a premium to the 10-year average, which is not comforting, though positively, the dividend yield is now c4% for large companies (FY26e). Hence, we anticipate a prolonged period of range-bound returns for the sector. This is similar to 2014-18, when IT index returns were in the mid-single digits,” it said in a note.

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