IT shares fall: IT shares fall on US growth concerns

The Nifty IT index fell 2.9%, while the benchmark Nifty ended 0.1% lower Wednesday.

“We see downside risks emerging for both the revenue growth of India IT services and valuation multiples,” said the brokerage in a client note. “Shifts in the macro environment and technology evolution are happening fast.”

Infosys dropped 4.3%, the top loser in the IT pack, after Morgan Stanley downgraded the stock from ‘Overweight’ to ‘Equal-Weight’. Other IT large caps such as TCS, LTIMindtree, HCL Technologies, and Tech Mahindra declined 1.7-3.6%. Midcap IT companies fell 2-3%.

While cutting its price targets, the brokerage said it prefers TCS over Infosys, Tech Mahindra over HCL, Coforge over Mphasis.

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Investors have turned sceptical about the prospects of India’s IT services sector as the global tariff war is feared to boost inflation and trigger a US downturn soon. These companies derive a bulk of their revenues from the US.”Given the mixed macroeconomic indicators, the US economy remains at a crossroads-while weakening conditions have increased expectations of rate cuts, persistent inflation could constrain monetary easing,” said Sagar Shetty, research analyst at StoxBox. “Against this backdrop, the outlook for the Indian IT sector remains mixed in the near term, with anticipated deal slippages and reduced corporate spending weighing on growth.” Shetty said margin pressures may persist as firms could engage in aggressive pricing to secure contracts.IT shares are down by 15-33% this year. The Nifty IT index is down 16.2% against the 5.4% drop in Nifty 50 in 2025. Morgan Stanley said despite the recent underperformance, the risk-reward is skewed more towards the negative than the positive.

In the US, shares of technology giants have led the country’s stock markets lower in the past few days after President Donald Trump declined to rule out the possibility the economy could enter a recession this year.

“Indian IT stocks-especially mid-sized companies-are trading at elevated valuations, which could dampen investor demand in the near term,” Shetty said.

Sumit Pokharna, vice president-fundamental research, Kotak Securities, said long-term investors could buy quality IT stocks like TCS, Tech Mahindra, Infosys, LTTS, and Coforge after the recent declines.