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Below the Quote on tariff impact on the IT Sector by Sumit Pokharna, VP-Fundamental Research, Kotak Securities

The imposition of very high reciprocal tariffs by the US on its major trading partners, including India, will likely have large negative consequences for global and US GDP growth, global and US inflation, and the profitability of certain sectors and companies in India.

A tariff has been imposed on India, although there is no specific tariff that has been imposed on IT services.

Notably, the US economy has weakened in recent months. Naturally, the deterioration in the macro environment will weigh on Q4FY25 numbers and FY26E guidance. We expect a sequential revenue decline for all large Indian IT service companies for the Mar’25 quarter due to seasonal weakness, lower billing days, and marginal deterioration in demand. The fallout of tariff threats by the US is a slowdown and uncertainty in spending. The Nifty IT Index has corrected ~20% in the last three months due to concerns over the recession in the US and the tariff war. Investors are catching their breath and evaluating whether the negatives are already priced in.

Any imposition of retaliatory tariffs on US exports by the US’s trading partners could add to global inflation, which had turned benign. Higher tariffs may result in higher inflation (versus the 2% target of the US Fed) and may impact the FED’s rate cut decision which is not conducive for the IT sector, in general.

We believe investor's focus will soon turn squarely to a string of key technology earnings.