Persistent, Mphasis, Coforge, TCS, Infosys: Why IT stocks are falling despite a weak rupee

IT stocks such as Persistent Systems, Mphasis, Coforge, Tata Consultancy Services Ltd (TCS) and Infosys led losers at the Nifty IT index on Friday, despite recent weakness in the rupee. The stocks fell amid persistent concerns over client demand and proposed overhauling of the H-1B visa system. Add to that were unconfirmed reports suggested the US President Donald Trump was looking to impose tariffs on India's IT sector. 

Shares of Persistent Systems fell 2.99 per cent to Rs 5,135 on NSE. It was followed by Mphasis, which declined 2.79 per cent to Rs 2,781.50. Coforge also fell over 2 per cent at Rs 1,655.70. India's largest IT exporter TCS dropped 1.50 per cent while the second-largest IT service provider Infosys shed 1.31 per cent. HCL Tech, LTIMindtree, Tech Mahindra, Oracle Financial and Wipro were all trading in the red. None of the Nifty IT index constituent was trading higher, as the index slipped 1.28 per cent to 34,692.85.

IT players continue to face headwinds from macro uncertainties, delayed decision-making, increased project scrutiny, and persistent weakness in discretionary budgets which would weigh on revenue growth, said Emkay Global. It, however, expects deal intake is likely to be steady, supported by cost optimization, legacy modernization, vendor consolidation, and growing AI investments.

MOFSL in a monthly note said its technology pack is trading at a P/E ratio of 21.9 times, reflecting a 3 per cent premium to its long-term average of 21.3 times.

"The IT sector remains in limbo, with valuations no longer the concern but structural demand questions persisting. Mid-tier players, once resilient, are now visibly slowing as growth moderation collides with consistent macro uncertainty," MOFSL said. 

Unlike earlier transitions where digital or cloud spending offset legacy drag, this cycle lacks a budgetary kicker, leaving GenAI to deepen the deflation without triggering new growth pockets, MOFSL said.

To be sure, four of the top-5 Indian IT services companies reported a sequential revenue decline in constant currency (CC) in Q1, with the management commentary for FY26 remaining largely unchanged. 

"FY26 started on a subdued note, as clients remain cautious about tech spending, particularly discretionary spends, and growth is unlikely to see any material acceleration in Q2. Elevated macro and geopolitical uncertainty dampen the outlook for IT spending and could delay a broad-based recovery in client spending. While select green shoots in BFSI persist, demand in manufacturing (notably auto), retail, and logistics remains under pressure, given tariff uncertainties," Emkay said.