Indian equity markets are seeing a sharp sell-off in Friday’s session, and IT stocks are leading the way lower. The Nifty IT index slipped nearly 2% during the day, with all 10 constituents trading in the red. From blue-chip tech giants to mid-sized players, the entire pack came under pressure as weak earnings and global headwinds weighed on sentiment.
“Q1 results of TCS indicate continuing struggle for IT companies, particularly large cap IT. However, midcap IT is likely to do well. Outperformance in Q1 will be from telecom, oil and gas and segments of autos. Investors may focus on fairly valued stocks with earnings visibility, ” said Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments.
Let’s take look at the three main reasons why IT stocks are dragging the market today –
1.TCS Q1 earnings
Tata Consultancy Services (TCS), India’s largest IT firm, released its June quarter earnings post-market hours on Thursday.
The company posted a 6% year-on-year rise in net profit to Rs 12,760 crore, beating Street expectations. However, the topline growth remained underwhelming. The company’s revenue from operations rose just 1.3% YoY and declined 3.1% in constant currency terms, marking a third consecutive quarter of muted performance.
Most of the brokerages remained cautious, with Nomura lowering its target price and pointing out of a sluggish growth ahead. While some other brokerages like Motilal Oswal and Nuvama maintained bullish ratings, but also noted out the near term volatility due to ongoing macroeconomic pressures and client spending cuts.
“TCS Q1FY26 results beat street expectations with a 6% profit rise, though demand contraction due to geopolitical uncertainties capped excitement. A major IT rebound likely hinges on a dovish Fed, with eyes now on Q1 results from HCL Tech (14 July), LTTS and Tech Mahindra (16 July), LTIM (17 July), and Infosys (23 July),” noted Prashanth Tapse, Senior VP (Research), Mehta Equities.
2.Global trade tensions flare up again
Geopolitical uncertainty added further strain on IT counters after U.S. President Donald Trump announced a 35% tariff on Canadian imports, effective August 1. He also hinted at a possible increase in base tariff rates to 15-20% for countries without specific tariff arrangements.
With most Indian IT firms heavily reliant on U.S. and European markets for revenue, any escalation in trade tensions is bound to raise red flags for investors and clients alike.
3.Broad-based market weakness
The IT sector’s decline is part of a wider risk-off mood in the market. As of mid-session Friday, both the Sensex and Nifty were trading sharply lower, dragged by weakness in large-cap names across sectors. Broader indices such as the BSE Midcap and Smallcap also saw cuts of around 0.70%.
Within the Nifty IT index, TCS led the losses with a 3% drop. This was followed by Wipro, LTI Mindtree, Oracle Financial Services, HCL Tech, Infosys, Coforge, and Mphasis, all down between 1% to 3%. Tech Mahindra, which showed relatively less weakness, was in the red.