Indian IT Stocks Decline as Dollar Weakness and Nasdaq Correction Weigh on Sentiment

Nifty IT Drops as Trade War Uncertainty and Weak Dollar Impact Sector

Indian IT stocks came under selling pressure on March 7, with the Nifty IT index snapping a two-day gaining streak amid global market turbulence. The Nasdaq Composite’s sharp 3% decline overnight, coupled with a weakening U.S. dollar and concerns over new tariff measures proposed by former U.S. President Donald Trump, weighed heavily on investor sentiment.

The broader Indian stock market saw IT heavyweights such as Infosys, LTI Mindtree, HCL Tech, and Wipro trading lower, as uncertainty loomed over the sector’s earnings outlook.

Why Indian IT Stocks Are Under Pressure

1. U.S. Tariff Concerns and Impact on IT Companies

• Former U.S. President Donald Trump announced plans for reciprocal tariffs on key trading partners, including India, effective April 2.
• The policy move raises concerns over potential disruptions in trade agreements, which could impact Indian IT firms that generate a large portion of their revenue from the U.S. market.
• While auto industry tariffs on Mexico have been delayed for a month, Indian exporters, particularly in IT and pharma, remain at risk.

2. Weakening U.S. Dollar Adds to Worries

• The U.S. dollar index has recorded its longest losing streak since September 2023, leading to sudden strength in the Indian rupee.
• A stronger rupee reduces the export earnings of Indian IT companies, making their services less competitive in global markets.

3. Nasdaq’s Steep Decline Signals Caution for Tech Stocks

• The Nasdaq Composite dropped nearly 3% overnight, officially entering a correction phase.
• The correction in U.S. tech stocks often reflects risk-off sentiment, which can spill over into Indian IT firms that derive a significant portion of revenue from U.S. clients.

IT Stocks React: Nifty IT Index Down Over 1%

• Mphasis emerged as the biggest loser, falling nearly 2% to ₹2,300 per share.
• LTI Mindtree and Infosys declined over 1% in early trading.
• L&T Technology Services, HCL Technologies, Tech Mahindra, TCS, and Wipro also saw marginal losses.
• Persistent Systems bucked the trend, trading in positive territory, as investors sought selective buying opportunities.

Investor Outlook: Short-Term Volatility Likely, Long-Term Fundamentals Intact

Despite the current headwinds, analysts remain optimistic about Indian IT companies in the long term, citing:

• Strong order pipelines and digital transformation deals.
• Continued demand for cloud computing, AI, and automation services.
• Growing presence in Europe and APAC regions, reducing reliance on the U.S. market.

However, near-term volatility may persist, as investors assess the impact of a weaker U.S. dollar, tariff uncertainties, and global tech stock movements.

Indian IT Faces Pressure but Long-Term Growth Drivers Intact

The sell-off in Indian IT stocks reflects global macroeconomic concerns and investor caution amid U.S. policy uncertainty. While near-term challenges remain, long-term fundamentals for the sector remain robust, driven by digital transformation and cloud adoption.

Investors will closely monitor further U.S. policy developments, currency fluctuations, and global tech earnings before making investment decisions in the sector.