Tech Stocks Slide as TCS Earnings Disappoint and Trade Tensions Rise
| 2025-07-12
TCS shares decline nearly 3.50 pc post earnings announcement; mkt valuation erodes by ₹42,295 cr
Indian tech shares fell sharply after Tata Consultancy Services posted subdued revenue growth. Broader market weakness and US tariff threats deepened the selloff.
Indian technology shares retreated on Friday as weaker-than-expected results from Tata Consultancy Services and renewed global trade tensions weighed heavily on investor sentiment. The Nifty IT index lost nearly 2% during the session, with all major constituents closing in negative territory.
Tata Consultancy Services, India’s largest software exporter, led the decline after reporting quarterly earnings that, while exceeding profit forecasts, highlighted slowing revenue momentum. Broader equity indices also suffered, reflecting widespread caution among investors amid geopolitical uncertainty.
TCS Results Fail to Lift Confidence
Tata Consultancy Services announced a 6% year-on-year increase in net profit to ₹12,760 crore for the quarter ending June. However, revenue from operations grew just 1.3% compared to the same period last year and fell by more than 3% when adjusted for constant currency, suggesting persistent demand challenges in key overseas markets.
The company’s earnings included a one-off tax reversal, which contributed to higher non-core income. Excluding this factor, operational performance remained subdued.
According to K Krithivasan, Chief Executive Officer of Tata Consultancy Services, demand continues to soften in major sectors. “We are witnessing a contraction due to macroeconomic and geopolitical uncertainty,” he said, adding that the company did not expect double-digit revenue growth in the current financial year.
The tepid revenue trends and cautious management commentary triggered a wave of profit-taking across the technology sector. TCS shares ended 3.5% lower on the National Stock Exchange, erasing more than ₹42,000 crore in market value.
Wider Impact Across Tech Stocks
Other prominent information technology companies were also caught in the downdraft. Shares of Wipro, HCL Technologies, Infosys, and Tech Mahindra all closed in the red, reflecting concerns about the sector’s near-term outlook.
The Nifty IT index fell 1.9% on the day, with mid-sized firms such as Coforge and LTI Mindtree declining alongside their larger peers. Investors appeared wary of further earnings disappointments as other major IT companies prepare to announce results later in July.
Analysts have warned that a sustained recovery in technology spending could hinge on improvements in the global economic environment and clarity on client budgets. “Sentiment turned risk-averse amid mounting concerns over a tepid Q1 earnings season,” Bajaj Broking Research noted in a commentary.
Trade Tensions Resurface
Adding to investor anxiety, United States President Donald Trump declared a 35% tariff on Canadian imports starting in August and suggested that broader tariff increases might follow. While the measures target Canada directly, the escalation in trade tensions fuelled fears of a wider impact on cross-border commerce, particularly in sectors like technology services that rely on global supply chains and overseas clients.
Indian IT companies derive a significant share of their revenues from North America and Europe, making them vulnerable to protectionist policies and disruptions in international trade flows.
Market Reaction Beyond IT
The weakness in technology shares also contributed to broader declines across India’s equity benchmarks. The BSE Sensex dropped nearly 690 points, or 0.83%, to finish at 82,500, while the NSE Nifty fell by 0.81% to close at 25,149.
Mid-cap and small-cap indices recorded more modest losses, though profit-booking was evident in several sectors. Analysts attributed the negative sentiment partly to the disappointing TCS results, which set the tone for the trading session.
Gaurav Garg, Analyst at Lemonn Markets Desk, said, “Dalal Street faced a broad-based selloff on Friday, as weak earnings from Tata Consultancy Services triggered sharp profit-booking across sectors.”
Context: An Industry Facing Multiple Challenges
India’s IT industry has played a vital role in the country’s export growth and employment generation. Companies such as Tata Consultancy Services, Infosys, and Wipro are regarded as bellwethers of corporate performance and economic confidence.
However, recent quarters have brought signs of deceleration. Cost pressures, cautious spending by clients in Europe and North America, and uncertainty over geopolitical risks have all contributed to slower growth.
TCS’s results also highlighted how non-core income, including exceptional tax reversals, has increasingly supported bottom lines, raising questions about the sustainability of earnings momentum.
With major technology firms including Infosys, HCL Technologies, and Tech Mahindra set to report earnings in the coming weeks, investors will be watching closely for any signals of recovery or further weakness.
Outlook Remains Cautious
While some analysts maintain that mid-sized IT firms may outperform due to their specialist focus, most expect volatility to continue until global economic conditions stabilise. Prashanth Tapse, Senior Vice President (Research) at Mehta Equities, said that any meaningful rebound in technology stocks will likely depend on improvements in demand and clearer signals from policymakers, particularly from the United States Federal Reserve.
Until then, the sector appears set for further scrutiny as investors weigh the risks of subdued growth against the potential for long-term structural demand in digital transformation services.
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