IT Stocks Dip 3% as NIFTY IT Slides: Impact of Trump’s Tariff Order on Indian Firms

NIFTY IT

IT Stocks Tumble Again: NIFTY IT Falls 3%; How Trump’s Tariff Order Could Impact Indian Firms

Stock Market Today: Shares of major Indian IT services companies such as TCS, Infosys, HCLTech, Persistent Systems, and Coforge faced significant pressure on Friday, April 4, amid growing concerns over the ripple effects of the US’s new tariff orders.

The NIFTY IT index was trading nearly 2% lower at 34,095.20, reflecting investor apprehension about the sector’s future amidst shifting global trade dynamics.

This decline follows a turbulent week where IT stocks were battered by mounting fears surrounding global economic slowdowns and US-China trade tensions, which have extended their reach far beyond the borders of the US.

The Ripple Effect of US Tariffs

While the export-driven Indian IT sector is not directly affected by Trump’s tariffs on goods, analysts warn of potential indirect impacts.

The primary concern revolves around a possible slowdown in US GDP growth and delays in business decision-making due to higher tariffs.

This could dampen demand in key verticals like manufacturing, logistics, and retail, which are critical for many Indian IT firms.

The $250 billion Indian IT industry, which relies heavily on US clients—with companies like TCS and Infosys generating nearly 48% and 58.4% of their revenue from North America, respectively—is now in a wait-and-watch mode.

The sector is closely monitoring how trade negotiations evolve in the coming quarters, as these could significantly influence growth trajectories.

Recent Market Performance: A Deep Dive

On April 3, IT stocks took a heavy hit, with the NIFTY IT index plunging 4.21% to 36,283.50. Every constituent ended the day in the red, marking a stark contrast to earlier gains.

In 2025, the index has already declined by over 19%, highlighting ongoing volatility in the sector.

Among the hardest-hit were Infosys, which saw a drop of 4.5%, and TCS, which slipped 3.8%. Even mid-cap companies like Persistent Systems and Coforge weren’t spared, with declines of around 5% and 4%, respectively.

The sell-off comes amid a broader global market downturn, with investors retreating from high-risk assets in favor of safer investments like bonds and gold.

Global Uncertainties Add to the Pressure

India’s IT services sector has been grappling with growth headwinds for several quarters. US and EU clients are increasingly cautious with their tech spending amid broader economic pressures.

Moreover, the rise of AI technologies has sparked fears about reduced job creation globally, adding another layer of uncertainty.

The US’s aggressive stance on global trade wars—with fresh tariffs targeting key trading partners—has intensified worries about a US economic slowdown.

This, in turn, could have second-order effects on Indian IT companies, impacting everything from client budgets to project timelines.

Furthermore, the COVID-19 pandemic has left lingering effects on global supply chains and business operations, compounding the challenges for IT firms trying to maintain growth in an unpredictable environment.

Expert Insights: What Analysts Are Saying

• Jefferies highlighted that while the sector isn’t directly hit by tariffs, indirect effects such as slower US GDP growth and tightened client budgets could harm demand, particularly in sectors like manufacturing, logistics, and retail.
• Rishi Shah, economist and partner at Grant Thornton Bharat, emphasized the “considerable short-term uncertainties” stemming from the new tariffs, which are already causing ripple effects across the global economy.
• Anuj Sethi, Senior Director at Crisil Ratings, noted that while Indian IT firms aren’t directly targeted by tariffs, inflationary pressures and budget constraints in the US could negatively affect revenue growth.

According to Shah, “There are considerable uncertainties in the short term due to the newly imposed tariffs, which are creating ripple effects across the global economy.

This uncertainty may lead to slowdowns in decision-making and impact US growth, potentially creating second-order effects on Indian IT services companies.”

Sethi adds, “While India’s IT services sector is not subject to tariffs by the Trump Administration, economic sluggishness in the US spawned by the plethora of tariffs imposed across sectors could increase inflationary pressures there and cause tightening of client budgets.

That can have a bearing on the revenue growth of homegrown IT service providers.”

The Long-Term Outlook for Indian IT

Despite the immediate challenges, there are reasons to be optimistic about the sector’s long-term prospects.

1. Diversification of Client Base

Many Indian IT companies are actively diversifying their client portfolios to reduce dependence on the US market. Companies like TCS and Infosys are expanding their presence in Europe, Asia-Pacific, and Latin America, which could serve as buffers against US-centric risks.

2. Rise of Digital and Cloud Services

The growing adoption of cloud computing, AI, and digital transformation by businesses worldwide is opening new growth avenues. Indian IT firms are well-positioned to capitalize on this trend due to their strong capabilities in technology services.

3. Focus on Domestic Market

With the Indian economy showing resilience, there’s an increasing focus on domestic IT demand. Government initiatives like Digital India and Smart Cities are expected to drive substantial business for Indian IT firms in the coming years.

4. Cost Efficiency and Agility

Indian IT companies are known for their cost efficiency and agile delivery models, which provide them with a competitive edge, especially when clients look to optimize expenses in uncertain economic climates.

Potential Strategies to Mitigate Risks

To navigate the current challenges, Indian IT firms might consider:

• Geographic diversification to reduce exposure to US-centric risks.
• Expanding into new verticals such as healthcare, fintech, and cybersecurity, which are less susceptible to trade wars.
• Enhancing automation and AI-driven services to improve operational efficiency and reduce costs.
• Strengthening partnerships with global technology giants to secure long-term contracts.

Final Remarks: A Sector in Transition

While the Indian IT sector faces significant short-term challenges due to US tariffs and global economic uncertainties, its long-term growth prospects remain robust.

The sector’s ability to adapt, innovate, and diversify will determine how effectively it can weather these turbulent times.

Investors and industry stakeholders will be watching closely as the situation evolves, with hopes pinned on strategic responses that can not only mitigate the adverse effects but also unlock new growth opportunities.