IT Stocks Sink Further On Tariff Jitters SEBI RA Warns Of Downside Re-Rating And Near-Term Underperformance

The Nifty IT index was one of the biggest drags on Friday, slipping 2.25% or 791 points. This was its fourth consecutive decline and a seventh drop in the past eight sessions.

While Persistent Systems (-3%) and Mphasis (-2.5%) led the declines, index heavyweights Tata Consultancy Services (TCS) and Infosys were down over 1.3% each.

Why Has The IT Sector Lost Steam?

India's IT sector is facing fresh turbulence as reports suggest that U.S. President Donald Trump may impose tariffs on Indian IT exports. This has weighed on sentiment, with the Nifty IT Index showing signs of technical weakness after a strong rally earlier in 2025, said SEBI-registered A & Y Market Research.

The industry continues to deliver strong numbers, with export revenues projected to reach $224 billion in FY25 and potentially $300 billion by FY26. Domestic IT spending is also expected to grow 11.1% in 2025 to $161.5 billion, led by software and IT services. While the sector remains critical to the economy, high attrition, margin pressures, and now tariff risks are clouding the near-term outlook, the analyst said.

Among the blue chips, TCS carries the highest U.S. exposure, making it more vulnerable to tariffs, though its scale and focus on automation provide some cushion. Infosys also faces similar challenges as exports form a large part of its revenue base. Industry bodies have yet to comment officially, but diversification into new markets may become a key strategy, they added.

The proposed U.S. tariffs, possibly up to 50%, could trigger a downside re-rating of the sector and short-term underperformance in IT stocks. While fundamentals remain intact, the situation is fluid, and much will depend on policy clarity and negotiations. For now, investors should brace for volatility, the analyst said.

Retail sentiment for the sector on Stocktwits remains 'bearish,' a trend that has dominated for most of the past year.

The IT index has declined nearly 17% during the period.

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