Nifty IT Drops 8% in 5 Days: 3 Major Challenges for Tech Stocks

The Nifty IT index has been on a rough ride in April, falling over 8% in just 5 sessions. Despite a slight 2% recovery today, the sector continues to struggle. The global economic situation, weak Q4 earnings, and policy changes in the US have led to uncertainty. Let’s look at the 3 main concerns affecting Indian IT stocks. 

US Tariffs and Recession Fears 

The trouble began on April 2 when US President Donald Trump announced new tariffs, calling it “Liberation Day.” These tariffs included a 125% increase on some Chinese imports and a 10% minimum tariff on others. Although a 90-day pause was introduced for some countries on April 9, it did little to calm market concerns. 

For Indian IT companies, this is a big issue as the US is their biggest client. Higher inflation and trade tensions in the US could lead to budget cuts in tech spending, making outsourced contracts vulnerable. Analysts have already warned that an “inflation shock” in the US could slow down IT investments. 

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Pentagon Cancels $5.1 Billion in IT Contracts 

Adding to the worries, the US government recently canceled IT service contracts worth $5.1 billion. The contracts, awarded to companies like Accenture and Deloitte, were deemed “non-essential.” This decision indicates a shift in US policy towards insourcing, which could negatively impact Indian IT firms that rely on outsourced government projects. 

Weak Q4 Earnings and Falling Valuations 

Indian IT firms are also dealing with a tough earnings season. TCS reported a 2% year-on-year drop in Q4 profit, missing expectations. Infosys is expected to project only 1-3% revenue growth for FY26, which is almost flat compared to FY25. 

Analysts believe IT companies are struggling to maintain profit margins due to pricing pressure, high employee utilisation, and slowing hiring.  

Nifty IT: How Bad Is the Fall? 

The Nifty IT index has been under pressure for a while: 

• Down 8% in the past 5 days 

• Down 12% in the last month 

• Down 22% over 6 months 

• Down 6% over the past year 

• Down 24% in 2025 so far 

While there was a small 2% recovery today, the overall trend remains weak. TCS saw a dip after its Q4 results, but stocks like Coforge and Mphasis gained around 3%. However, given the current challenges, the tech sector may not see a full recovery anytime soon. 

Conclusion 

The Indian IT sector faces multiple headwinds, from US economic policies to sluggish earnings. While some recovery is possible, sustained growth may take time as global uncertainties continue. 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.