IT stocks tumbled on Friday after US President Donald Trump said he would impose an additional 10 percent tariff on Chinese imports while moving ahead with levies on Canada and Mexico. Amid the ongoing correction, the Nifty IT index is down 19.28% from its record high reached in mid December last year.
The index rose to a high of 46,088 on December 13, 2024. In the current session, the index slipped 1,748 points or 4.48% to a low of 37,198. With today's fall, the Nifty IT index has slipped for the seventh straight session. Trump announced tariffs on China, Mexico and Europe in January end, putting global economic growth at risk. Since then the Nifty IT index has fallen 11%. On a year to date basis, the index is down 14%.
On similar lines, the BSE IT index slipped 1662 pts or 4.34% to a low of 36,597 in the current session. It has lost 10.65% in a month and fallen 15.22% this year.
Brokerage JM Financial says a trade war seems imminent, which is likely to put global economic growth on risk. "Inflation in the US has pushed out Fed rate cut hopes and dragged consumer confidence in the US. Such uncertainty is anathema to IT Services demand," said the brokerage.
Mphasis was top loser on the Nifty IT index today, tumbling 6 percent to Rs 2232 per share. Other losers from the IT pack were Tech Mahindra (5.81%), Wipro (5.45%), Persistent Systems (5.13%), Infosys (3.97%), TCS (3.86%) and L&T Technology Services dropping 3.17%, respectively.
All Nifty IT index components were trading in the red today.
HSBC Research in a report on IT services said, "Excluding fundamental reasons, IT has outperformed in the past when INR is depreciating or the rest of the market is seeing sharp EPS cuts. We think the overall market (NIFTY) earnings downside risk is slightly more than IT now. We estimate EPS downside risk for IT is 2-3% (average) while EPS growth for IT is 10-11% vs market (NIFTY proxy) earnings growth of 14%. Considering the fundamental outlook and relative valuations to the market, we think it will be tough for IT sector to outperform the market in 2025/FY26."