Domestic tech stocks came under significant selling pressure in July, failing to extend their bullish rally for the third consecutive month as tepid earnings, a resurgence of global trade tensions, caution about future growth, and signs of restructuring have made investors wary of IT stocks, with even mid-cap tech stocks also failing to escape from the sell-off.
Analysts have also revised their target price multiples lower for most stocks, including top industry giants, further pressuring the overall sector.
All 10 constituents of the Nifty IT index closed the month with negative returns, with four of them posting double-digit losses. HCL Technologies was the worst performer, losing 15% of its value, followed by Persistent Systems, which declined 14.6%. Wipro and Infosys also closed the month with losses of 6% and 6.7%, respectively.
Tech Mahindra and TCS dropped 13% each in July. Only Mphasis and LTIMindtree have managed to end the month with mild losses. With heavyweight stocks underperforming sharply, the index ended the month down 9.4%, marking its biggest monthly decline since February 2025 and the second-largest drop of the year.
Top IT firms end Q1 with single-digit top-line growth
The country’s top tech companies ended the June quarter with muted performances, as Indian IT giants reported year-on-year revenue growth ranging from 0.8% to 8.1%.
Tata Consultancy Services (TCS) missed quarterly revenue estimates as clients remained cautious about non-essential spending amid U.S. tariff-related uncertainty. Its revenue rose 1.3% YoY to ₹63,437 crore, while net profit increased 5.9% to ₹12,760 crore. The tech bellwether also announced it would cut 2% of its workforce, or around 12,000 jobs, in FY2026.
The company said the layoffs are part of the company’s broader strategy to become a “future-ready organisation,” with its focus shifting to investments in technology, AI deployment, market expansion, and workforce realignment.
HCLTech reported a June-quarter profit below analyst estimates and lowered its operating margin forecast for FY2026. The revenue grew 8.1% to ₹30,349 crore, but profit dropped 9.7% to ₹3,843 crore YoY due to higher expenses and a one-time impact from a client bankruptcy.
Infosys saw revenue rise 7.5% to ₹42,279 crore, while net profit increased 8.6% to ₹6,921 crore. Wipro’s topline grew marginally by 0.8%, but there was a sequential decline of 1.6%. The company has given sequential guidance of -1% to 1% in constant currency terms.
Tech Mahindra posted 2.65% revenue growth to ₹13,351.2 crore, with net profit surging 33.9% to ₹1,140.6 crore.
Tariff pressure is likely to weigh on new deals
The demand outlook for India’s $283-billion IT sector remains uncertain due to US tariff risks and broader geopolitical factors. Indian tech giants started the year with high hopes for pro-growth policies from the Trump administration.
However, a series of tariff-related announcements soon dampened investor sentiment, raising fears that a potential US economic slowdown triggered by trade wars could lead to fewer IT deals.
US President Donald Trump’s inconsistent tariff policies have created confusion over their global economic impact and dashed hopes of a revival in client confidence and spending in India’s largest IT export market. A survey in May showed that two in five tech executives had deferred discretionary projects.
On Wednesday, Trump imposed a 25% tariff on Indian imports along with an unspecified penalty. Analysts warn this move could increase costs for US clients and, in turn, reduce IT spending.
Global brokerage firm CLSA says ambiguity around US tariffs is causing clients to delay decisions. Clients are now prioritising chips and cloud spending over outsourcing IT services, it said.
Additionally, the ongoing tariff tensions have also influenced the US Federal Reserve policy decisions as the central bank remains cautious, concerned that higher tariffs could hurt consumer pockets and push up inflation. This also led the policy makers to hold interest rates steady for the fifth consecutive meeting in July, despite repeated pressure from the White House to lower borrowing costs.
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