Nifty IT declines for 3rd month despite market rebound; Infosys top laggard

Indian stock market today: Even as the benchmark indices made a strong comeback in March, breaking a five-month slump, tech stocks remained under pressure, extending their losing streak to the third consecutive month. Fluctuating US tariff policies under President Donald Trump have clouded the outlook for the American economy and the Federal Reserve's monetary policy path, raising concerns about a slowdown in new deal inflows.

Although domestic tech stocks saw a resurgence in the second half of March after Trump softened his stance on reciprocal tariffs, it wasn’t enough to help them end the month in the green.

Moreover, analysts are becoming increasingly cautious about growth in the tech sector amid concerns over the US economy, as they believe rising tariffs on imported goods will hinder growth, prompting them to cut their growth estimates.

In addition to growth concerns, they believe domestic tech stocks are still trading at elevated levels despite the sharp decline from their peaks, keeping pressure on the sector.

Global brokerage firm Citi has recently stated that expectations of US economic growth in Donald Trump's second term as president during the October–December quarter did not materialise. Instead, uncertainty over U.S. economic growth has increased due to his protectionist policies.

In the medium term, IT firms will face challenges due to artificial intelligence disruption and slowing software growth, which could impact spending, it said. Morgan Stanley also expressed concerns about the broader Indian IT services sector, noting emerging downside risks to revenue growth and valuation multiples.

The brokerage highlighted that a combination of lower real and nominal GDP growth in the US, along with an ongoing technology transition cycle, is creating headwinds for Indian IT companies.

US President Donald Trump is due to announce reciprocal tariffs on several trading partners, including India, on April 2.

Nifty IT records biggest quarterly drop in last 10 quarters

Against this backdrop, the Nifty IT index plummeted another 1.16% in March, following a 12.53% slump in February and a 1.56% decline in January, bringing its Q1CY25 drop to nearly 15%—the biggest quarterly decline since Q2CY22, when the index tumbled 23.33%. From its peak, the index is now down 20%.

Among the worst performers in March, Infosys emerged as the top laggard with a drop of 7%, followed by Wipro, Tech Mahindra, and LTI Mindtree, all of which ended with losses ranging between 4% and 5.6%.

Stocks began their downward slide in February as fears grew that the U.S. economy could slip into a recession, triggered by trade disputes initiated by Donald Trump with its closest trading partners.

Rising trade tensions are also dampening expectations for multiple U.S. Federal Reserve rate cuts this year. Since retaking the White House, Trump has issued a flurry of tariff announcements, fueling investor uncertainty and fears of a major trade war.

The escalating trade tensions have dented US consumer sentiment, as they now expect domestic prices to rise sharply, while businesses are also worried that trade disputes could derail demand. In an aim to cut spending, the Trump administration is reportedly cutting thousands of federal jobs to cut costs, a move that has begun to impact global IT giant Accenture.

Accenture is among the first US corporate giants to be affected by the Trump administration's so-called Department of Government Efficiency, an initiative led by billionaire Elon Musk to downsize federal agencies and consolidate office spaces.

Goldman Sachs lifts recession forecast ahead of reciprocal tariffs

With rising trade tensions and looming reciprocal tariffs, American brokerage firm Goldman Sachs has recently raised its US core inflation forecast. The firm now expects its preferred core measure, which excludes food and energy prices, to hit 3.5% in 2025—a 0.5 percentage point increase from the previous forecast and well above the Federal Reserve’s 2% target.

The investment bank now anticipates that tariff rates will jump by 15 percentage points, a scenario it previously considered a "risk case" but now sees as more likely, given Trump's expected announcement of reciprocal tariffs on Wednesday.

Additionally, the Wall Street firm now projects unemployment to reach 4.5%, marking a 0.3 percentage point increase from its prior estimate. As a result, Goldman now assigns a 35% probability of a recession within the next 12 months, up from 20% in its previous outlook.

The forecast suggests a growing risk of stagflation—an economic condition characterized by low growth and high inflation. The last time the U.S. experienced stagflation was in the late 1970s and early 1980s.

At that time, the Paul Volcker-led Federal Reserve dramatically raised interest rates, pushing the economy into recession as the central bank prioritized controlling inflation over sustaining economic growth, CNBC reported.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.