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Informist, Friday, Apr. 11, 2025

MUMBAI – Information technology stocks are expected to remain range-bound in the near term until clarity arises about the growing uncertainties due to the ongoing tariff war between the US and China. After sector bellwether Tata Consultancy Services indicated that it faced some delays due to tariff-led uncertainty in the US, investors will now watch for management's commentary from its peers, including Infosys, Wipro and Tata Elxsi, which are scheduled to detail their earnings next week.  

The March quarter earnings started on a subdued note with TCS reporting weaker-than-expected earnings on Thursday. However, most IT stocks remained in green Friday, catching up to the global market rally on Thursday after US President Donald Trump announced a 90-day pause on reciprocal tariffs on its trading partners barring China. Following this, Goldman Sachs rescinded its prediction of a potential recession in the US, Moneycontrol reported. Earlier, Goldman Sachs had predicted a 65% chance of the US going into a recession in the next 12 months.

Though the 90-day tariff break is seen as a positive sign by the market, the ongoing disruptions in manufacturing, retail and supply chains temper optimism, an analyst covering the sector at a domestic brokerage said. With China increasing tariffs on US goods to 125% on Friday, he believes "... probably we are close to the point that both (US and China) will come to the negotiation table." However, for the IT sector, he expects clients to be watchful on tech spending in the June quarter.  

This week, the Nifty IT index fell over 2% with all constituents barring LTIMindtree declining nearly 1-4%. Mid-cap companies Coforge, L&T Technology Services, and Mphasis fell the most over the week. So far this year, the IT index has fallen over 24% and nearly 6% since the announcement of reciprocal tariffs by the US on Apr. 2. 

The overall trend for Nifty IT remains weak, Nandish Shah, senior derivative analyst at HDFC Securities said, adding that "unless Nifty IT closes above 34400, it is a 'sell on rally' kind of sector."  He expects the index to find support at 32300 levels and resistance at 34400 levels in the next week. 

Infosys and Wipro are expected to report weak earnings for the March quarter due to seasonality-led weakness and an uncertain demand environment. Sumit Pokharna, vice-president of fundamental research at Kotak Securities, expects a 2.3% sequential decline in revenue for Infosys in Jan-Mar on the back of a seasonal weakness in demand and a sequential decline in revenue from third-party software sales. Similarly, Wipro's revenue in constant currency terms for the quarter is seen falling marginally on quarter due to weakness in the energy, manufacturing and resources verticals and geographies like Europe, Asia-Pacific, Middle East, and Africa, according to analysts. Its earnings before interest and tax margin is expected to be stable in the quarter with the benefit of the rupee depreciation being offset by a lack of operating leverage.  

Pokharna remains cautious on Tata Elxsi due to its exposure to the automobile sector, which is directly at risk of the global tariff war. He expects engineering, research, and development companies to report weak numbers for the March quarter, with Tata Elxsi showing the worst performance. 

TOP HEADLINES

* Analyst Concall:TCS sees headwinds for margin if global uncertainty persists
* No major project cancellations seen despite global uncertainties, says TCS
* Earnings Review: TCS Jan-Mar net profit slips on qtr, revenue up marginally
* Infosys extends partnership with financial services group AIB
* Mphasis gets US patent for quantum prediction system
* Proximus Global, Route Mobile arm launch 365guard for mobile network players
* Cyient sets up arm for application-specific semiconductor solutions
* HDFC Mutual Fund buys 0.6% stake in Cyient for INR 685.7 mln via bulk deal
* Approval to change name of Affle (India) to Affle 3i granted at EGM
* Mphasis gets demand order of INR 2.32 bln from Income Tax Dept, Bengaluru
* Fitch affirms HCL Tech's long term rating at 'A-' with stable outlook
 

Following are the resistance and support levels for the stocks for next week as per calculations by Informist based on their prices on the National Stock Exchange:

End

US$1 = INR 86.04

Reported by Arya S. Biju

Edited by Saji George Titus

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