The recent series of U.S. tariff announcements by President Donald Trump on outsourcing, imported digital services, and cross-border contracts brought back volatility in Indian markets. The industry is also experiencing new scrutiny, with the U.S. contributing close to 60% of the total Indian revenue in the export of IT. The analysts caution that the proposed outsourcing levies and increased service-tax barriers may strangle the margins and slow down new deal signings of leading companies.
Short-term market reaction
After the U.S. imposed mutual tariffs and import duties in the first part of the year, the equity indices in India felt the impact. Nifty IT declined by 4.2% in a single session on April 3, 2025, following the announcement of tariffs – its worst one-day decline in two years. During the week ended July 2025, the Nifty IT index was back to being the worst-performing sectoral index, losing 3.8%, and Nifty 50 reduced approximately 1.22%.
These equity actions were accompanied by huge institutional action, which can be seen in block deal in NSE of certain IT companies, as they prefer to exit before major currency movements and policy alterations.
Besides short-term impacts on the market, there are broader trade impacts caused by tariffs. As an illustration, during May and September 2025, the export of India to the U.S. decreased by 37.5% and declined from USD 8.8 billion to USD 5.5 billion.
Why IT stocks were vulnerable (but not equally)
Indian IT-services firms might appear to be immune on the surface due to the fact that they are selling services, and not goods. The possibility of new U.S. tariffs on outsourcing and foreign remote labour is however generating actual profit-risk.
An example is the proposal of the HIRE Act. It states that the U.S would tax 25% on American companies that outsource labour internationally, including India. Consequently, Indian technology-services companies have not only to deal with sluggish expenditure by the U.S. clients (due to tariff-related inflation) but also with an increase in contract costs and postponed deal closures.
This two-fold stress is visible in the IT stocks such as Infosys, TCS, LTI Mindtree share price and more.
Pockets of resilience: why some it stocks may hold up
IT firms are not all equally impacted. Firms that are characterised by a higher ratio of recurring cloud revenues, strong automation portfolios, as well as geographic diversification are more likely to do well with macro disruptions.
Firms that have diversified clientele in various industries like the BFSI, healthcare and manufacturing are in a better position to mitigate the effects of regional slowdowns. Also, ongoing AI, data analytics, and cybersecurity investments are enabling these companies to maintain demand amid the uncertainty in the world.
IT companies will need to expedite digitisation by implementing automation, cloud solutions, and AI-based solutions to reduce the said shock, which consequently will facilitate the medium-term development of the Indian IT firms.
To investors, this change would entail finding companies that are able to transform macro uncertainty into market share gains.
How investors can position themselves now
Increased uncertainty is a signal to investors that they need to look at quality rather than momentum. Firms that have multi-year leases, a strong free cash flow, and a diversified client base are still appealing.
The periodic swings in the stock are a common indication of general feeling towards the company involving digital transformation instead of the fundamentals of the company.
Conclusion
Stocks of Indian IT are at the crossroads of trade tension and the momentum of digital transformation in the world. Although tariff shocks caused by the policies of Trump have caused short-term volatility, the future perspective of the situation is positive. The technology industry in India still has its core strength even under the impact of near-term headwinds due to the digital-first growth, automation demand, and a globally competitive cost base.