Stock market today: Indian technology stocks have made a strong resurgence in recent sessions after being beaten down by Dalal Street investors for a prolonged period due to concerns over a slowdown in the U.S. economy, which is the biggest revenue source for domestic companies.
Although fears of a slowdown in the world’s largest economy persist, easing trade tensions have lifted hopes that the worst may not be as severe as previously projected, bringing some optimism back to technology stocks.
Over the last seven trading sessions, the Nifty IT index has gained 5.24%, helping the index turn positive for March with a 1.1% gain. However, the index remains one of the worst performers among major sectoral indices, as it is down 18.18% from its recent high. It has declined 15.4% in January-March and is set for its worst quarter since June 2022.
Recent media reports suggest that Donald Trump’s next round of tariffs may be more measured than previously suggested. On Monday, Trump said that he may give “a lot of countries” breaks on reciprocal tariffs. He also stated that auto tariffs were imminent, but not all of the threatened levies would be imposed on April 2, and some countries may receive exemptions.
However, investors are closely monitoring the White House’s trade policies, as Trump has recently paused some tariffs while announcing additional measures, which have created significant uncertainty in recent weeks.
Trump has issued a flurry of tariff announcements since retaking the White House, fueling investor uncertainty and fears of a major trade war. The escalating trade tensions have dented U.S. consumer sentiment, as they now expect domestic prices to rise sharply, while businesses are also worried that trade disputes could derail demand.
The Trump administration is reportedly cutting thousands of federal jobs to cut costs, a move that has begun to impact global IT giant Accenture. The consulting firm stated last week that tighter federal spending is starting to weigh on its revenues.
Accenture is among the first U.S. corporate giants to be affected by the Trump administration’s so-called Department of Government Efficiency, an initiative led by billionaire Elon Musk to downsize federal agencies and consolidate office spaces.
UBS turns bullish on Indian IT companies
Global brokerage firm UBS, in its latest report, stated that Indian IT stocks have corrected 15% to 20% in recent months, while earnings downgrades during the same period have been relatively mild, at about 0% to 2%. UBS believes that the P/E ratio of stocks has corrected to a much greater extent, declining by 12% to 21% over the past three months, driven by expectations of an earnings deceleration.
However, the brokerage discussions with IT management teams suggest that while uncertainty has increased, the impact on client spending has been marginal. Although UBS expects FY26 to be a challenging year for Indian IT companies, with a projected 5% to 7% earnings cut in consensus estimates, it maintains a positive outlook for the sector, anticipating that FY26 could outperform FY25.
UBS expects P/E multiples to recover to average FY25 levels in the near term. The brokerage further noted that factors such as Fed rate cuts and corporate tax reductions could boost tech spending.
UBS also warns that company-specific challenges, including deal ramp-downs at TCS, HCL Tech, and Infosys, will impact revenue growth. Large-cap IT firms are expected to see soft revenue in Q4, with slight declines for Infosys and Wipro. While TCS and Tech Mahindra may witness marginal margin improvements, Infosys, Wipro, and HCL Tech could face moderate margin declines.
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.
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Business NewsMarketsStock MarketsNifty IT gains over 5% in 7 sessions on hopes of softer Trump tariffs. Is the worst over for tech stocks?
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26 Mar 2025, 11:33 AM IST
