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Informist, Friday, May 16, 2025

MUMBAI – Most information technology companies are likely to fall or see limited gains next week as discretionary demand in the US remains uncertain despite Washington and Beijing dropping tariffs against each other. Additionally, reports of US clients pausing orders, an issue acknowledged by several companies during their March quarter earnings calls, are expected to result in weak performance for the June quarter as well.

"With low discretionary spending...there will be muted growth (in Apr-Jun)," said Ambrish Shah, a research analyst with Systematix Shares and Stocks. "Looks like clients (are) in wait and watch mode."

Shah expects companies' earnings growth in the June quarter to mirror that of the March quarter. Among Nifty 50 IT firms, Infosys, HCL Technologies, Tata Consultancy Services, and Tech Mahindra posted on-year sales growth of 0.3–4.8% in constant currency terms for the March quarter while Wipro saw a 1.2% decline.

Analysts remain concerned about weak discretionary spending in the US, which has failed to pick up so far this year. Although a rebound was initially anticipated, the prospect of sustained high interest rates due to reciprocal US tariffs has led to downward revisions in expectations.

"Rapid macro deterioration over the last three months means FY26 will, most likely, turn out to be a more modest year than was earlier envisaged," Nuvama Insitutional Equties said in a sector report Monday. "We reckon the growth will have some impact due to macro headwinds over the next one or two quarters."

Amid these risks, analysts are not expecting any sharp upside in stock prices for now. However, some analysts said a large part of risks to earnings in the coming quarters has been factored into stock prices, which would likely limit any sharp fall in these stocks.

While analysts have raised concern about near-term visibility of revenue for the sector, they expect companies to achieve their FY26 guidance. "...companies have set expectations low with their guidance, which looks achievable given strong order backlog (especially for TCS and Infosys)," JM Financial Institutional Equities said in a strategy report Tuesday.

The Nifty IT index rose nearly 6% this week after US and China reached an agreement to lower most of the tariffs imposed against each other. Owing to this, risk of inflation in the US leading to prolonged period of high interest rates has come down, analysts said. High interest rates tend to push clients to pause spending related to their IT systems.

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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

Reported by Anshul Choudhary

Edited by Subhojit Sarkar

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