IT Stocks Slide as US Budget Concerns Spark Global Selloff

On May 22, Indian IT stocks took a beating as rising concerns around the US fiscal deficit sent shockwaves across global equity markets. The Nifty IT index dropped nearly 1.4% in early trade, with major tech companies including Tech Mahindra, Infosys, and TCS leading the decline.

The downturn was triggered by developments in the United States, where Republican lawmakers are finalizing a new budget proposal. The plan reportedly includes tax cuts, but investors fear that it may significantly widen the federal deficit, which is already under scrutiny after a recent US debt rating downgrade by Moody’s.

“The uncertainties in the US bond market have raised red flags globally, especially for IT firms that are heavily reliant on American clients,” a market analyst noted.

As a result of these concerns, US long-term bond yields dipped, leading to a wave of selling pressure on Wall Street. The ripple effects were felt across Asia, with key indices like Japan’s Nikkei, South Korea’s Kospi, and Hong Kong’s Hang Seng all falling over 1% in morning trade.

Back home, Sensex and Nifty opened in the red, with the IT sector emerging as one of the worst performers.

Among the worst hit was Tech Mahindra, which fell over 2% to trade around ₹1,564. Shares of Persistent Systems, HCL Tech, and Mphasis also tumbled more than 2%. Infosys and TCS, the two giants of the Indian IT sector, were down over 1.4%, while Wipro slipped over 1%. Other players like LTI Mindtree and Coforge also traded in the red.

This isn’t the first shock for the tech sector. IT stocks had been witnessing volatility since Moody’s downgraded the US government’s credit rating, citing ballooning deficits and refinancing challenges amid high interest rates.

“For India, the IT sector is what oil is to Saudi Arabia,” said Manish Chokhani at the Mirae Asset Capital Markets Invest India Conference 2025, highlighting the critical role the sector plays in the Indian economy.

Given the exposure to the US market, IT stocks remain under close investor watch. While the sector has seen periods of strong growth, macroeconomic uncertainty in the US could dampen near-term prospects for India’s tech giants.