Indian IT Stocks Struggle Amid Weak Outlook, Spending Cuts

Indian IT stocks have declined 1.9% since Tata Consultancy Services reported lower-than-estimated net income in Q2. Infosys and Wipro's results were in line with estimates but offered no sign of a significant demand rebound in the second half of the fiscal year. Fresh concerns about US lending standards and H-1B visa rules are also weighing on the sector.

Indian IT stocks experienced a 1.9% decline following Tata Consultancy Services' (TCS) lower-than-estimated net income for the second quarter (Q2). While Infosys and Wipro reported earnings in line with estimates, there was no significant indication of a demand rebound in the second half of the fiscal year. Additionally, fresh concerns about US lending standards and H-1B visa rules are adding to the sector's challenges.

TCS, India's largest IT services company, reported in a Scanx report that its Q2 net profit rose 1.4% year-on-year to ₹12,075 crore, falling short of analyst expectations. The company's revenue grew 3.7% quarter-on-quarter to ₹65,799 crore. Despite the earnings disappointment, TCS stock showed resilience, declining only 1.8% before recovering.

Infosys and Wipro also reported mixed results. Infosys' revenue grew 2.2% sequentially and 2.9% year-on-year in constant currency terms, while Wipro's revenue increased 0.3% sequentially but declined 2.6% year-on-year. Infosys shares fell 3% in early trade on the NYSE, while Wipro's shares dropped by 2%, according to a Times of India article.

The subdued demand environment, ongoing tariff uncertainties, and cautious discretionary spending by clients continue to dominate the sector. TCS, Infosys, and Wipro are focusing on AI-led transformation and strategic investments to navigate these challenges and position themselves for future growth. However, the broader market volatility index remains near record lows, reflecting the subdued volatility across Nifty 50 companies, as noted in the Scanx report.

Investors should closely monitor the sector's performance in the coming quarters, as the impact of US lending standards and H-1B visa rules remains uncertain. The IT services sector faces headwinds, but the focus on AI-led transformation and strategic investments may offer a pathway to future growth.