Selling before the numbers confirm what everyone already expects
As India's technology giants prepare to open their books for the December quarter, markets have begun the quiet ritual of retreat — investors trimming positions not out of panic, but out of foresight. The country's largest software exporters, long the pride of a $283 billion industry, now face a season of muted expectations shaped by cautious American clients, macroeconomic headwinds, and a year in which foreign capital fled at record pace. The question hanging over January's earnings announcements is not whether growth has slowed, but whether the seeds of an AI-driven recovery can be seen clearly enough to restore confidence.
- Nine of ten Nifty IT stocks closed in the red as investors moved to reduce exposure before earnings season formally opens on January 12.
- TCS, Wipro, and Tech Mahindra each fell between 2 and 3 percent — not on breaking news, but on the weight of what the numbers are expected to confirm.
- The top six Indian IT firms are forecast to grow revenue just 4 percent year-on-year, a sharp deceleration from 6.5 percent the prior quarter, as US clients tighten budgets and holiday shutdowns bite.
- Foreign investors withdrew a record $8.5 billion from Indian IT stocks in 2025, driving the Nifty IT index down 12.6 percent and making it the worst-performing sector in Indian markets.
- Accenture's AI-fueled earnings beat offered a flicker of optimism, but brokerages caution that meaningful AI momentum for Indian firms remains a 2026 story at the earliest.
Indian technology stocks retreated broadly on Thursday as investors began reducing positions ahead of a December quarter earnings season widely expected to disappoint. TCS fell as much as 3 percent, while Wipro and Tech Mahindra each dropped over 2 percent. Coforge, Mphasis, LTIMindtree, and others followed suit, leaving nine of ten Nifty IT index constituents in negative territory by the close.
The selling reflected deliberate positioning rather than surprise. Formal results begin arriving January 12, when TCS and HCLTech report, and brokerages have already set low expectations. The top six Indian IT firms are projected to post roughly 4 percent year-on-year revenue growth for the quarter — a meaningful step down from the 6.5 percent recorded in September. TCS is forecast at 4.2 percent growth, down from 5.6 percent a year earlier. Neither HCLTech nor Infosys is expected to raise their fiscal 2026 guidance.
The root cause is familiar: persistent softness in the United States, where Indian IT firms earn most of their revenue. American corporate clients are spending carefully, holiday shutdowns disrupted project work, and uncertainty around tariffs, visa costs, and broader US economic conditions has kept technology budgets constrained. The industry has not seen double-digit revenue growth since early 2023, when post-pandemic digital transformation was still running hot.
The toll on investor sentiment has been severe. Foreign investors pulled a record $8.5 billion from Indian IT stocks across 2025 — nearly half of all foreign equity outflows from India that year — and the Nifty IT index finished the year as the country's worst-performing sector, down 12.6 percent.
One thread of hope runs through the gloom. Accenture recently exceeded Wall Street expectations on the back of AI-related demand, signaling that the technology exists to drive a new spending cycle. Indian IT firms are building their own AI capabilities through acquisitions and partnerships, and brokerages believe momentum could build meaningfully as 2026 progresses. But that future remains just out of reach for now, and Thursday's market moves were investors choosing not to wait and see.
The Indian technology sector took a step backward on Thursday as investors began trimming positions ahead of earnings season. Shares of Tata Consultancy Services, the country's largest software exporter, fell as much as 3 percent during the day's trading. Wipro and Tech Mahindra each dropped more than 2 percent. Oracle Financial Services Software, Coforge, Mphasis, LTIMindtree, and Persistent Systems all moved lower. Nine of the ten stocks that make up the Nifty IT index were in negative territory by day's end.
The selling was not random. Investors were positioning themselves ahead of the formal start of the December quarter earnings season, which begins on January 12 when TCS and HCLTech will announce their results. The move reflected a broader anxiety about what those numbers will show—and brokerages across the market have already signaled they expect disappointment.
The consensus forecast is stark: the top six Indian IT firms by revenue are expected to report roughly 4 percent year-on-year revenue growth for the quarter, a significant slowdown from the 6.5 percent they managed in the September quarter. Profit is expected to rise about 5 percent. These are not the kinds of numbers that excite investors. TCS alone is forecast to report 4.2 percent revenue growth, down from 5.6 percent in the same quarter a year ago. Infosys is expected to post 8.1 percent growth, while HCLTech is projected at 4.6 percent—both declines from their year-ago comparisons.
The underlying story is one of persistent weakness in the United States, where Indian software firms earn the bulk of their revenue. American clients are spending cautiously. Holiday-period shutdowns disrupted work. Macroeconomic uncertainty—particularly around potential tariffs, proposed visa fee increases, and broader concerns about U.S. economic growth—has made corporate technology budgets tighter. The $283 billion Indian IT industry has not reported double-digit revenue growth since the March quarter of 2023, when the post-pandemic surge in digital transformation and cloud adoption was still driving demand.
The damage to investor confidence has been substantial. Foreign investors pulled a record $8.5 billion out of Indian IT stocks during 2025, accounting for nearly half of all foreign outflows from Indian equities that year. The Nifty IT index itself fell 12.6 percent in 2025, making it the worst-performing sector in Indian markets and underperforming both broader Asian and emerging market indices.
There is one potential bright spot on the horizon. Accenture, the global consulting giant, recently beat Wall Street expectations on the strength of artificial intelligence-driven demand. But even Accenture maintained a cautious outlook for the near term, suggesting that AI enthusiasm has not yet translated into broad-based spending increases. Indian IT firms do not have pure-play AI businesses, but they are building AI capabilities through acquisitions and partnerships. Brokerages expect AI-related momentum to build over the next six months, with demand potentially improving as 2026 progresses.
For now, though, the market is bracing for a tepid quarter. Most brokerages do not expect HCLTech to raise its fiscal 2026 revenue growth guidance of 2 to 3 percent, or Infosys to lift its forecast of 3 to 5 percent. The profit-taking on Thursday was investors getting ahead of that reality—selling before the earnings announcements confirm what the numbers already suggest.
Citações Notáveis
Brokerages expect another muted quarter for Indian IT firms as weak demand in the United States and holiday-period client shutdowns continue to weigh on technology spending— Market consensus from nine brokerages
A Conversa do Hearth Outra perspectiva sobre a história
Why are investors selling now, before the earnings are even announced? Don't they want to see the actual numbers first?
They do, but the numbers are already baked into the consensus. Every major brokerage has published forecasts, and they all point the same direction—slower growth. Selling before the announcement lets investors lock in whatever gains they have rather than wait for confirmation of what they already expect.
So this is about the United States market specifically?
Largely, yes. American clients account for a huge portion of revenue for these firms. When U.S. companies tighten their technology budgets, Indian IT services firms feel it immediately. Right now, there's uncertainty about tariffs, visa policies, and whether the American economy itself is slowing down. All of that makes clients hesitant to commit.
The article mentions AI as a potential bright spot. Why isn't that lifting the sector?
Because it's still mostly potential. Accenture showed that AI demand exists, but even they're being cautious about the near term. Indian IT firms are building AI capabilities, but they don't have the kind of pure-play AI businesses that would drive explosive growth right now. The expectation is that AI momentum builds over the next six months, but that's a 2026 story, not a December quarter story.
What about the foreign investor exodus—$8.5 billion in 2025. Is that a sign of deeper trouble?
It's a sign of how much confidence has eroded. That's nearly half of all foreign money leaving Indian equities, and it's concentrated in IT. Investors are worried about tariffs, visa fees, and weak spending. They're not seeing a near-term recovery, so they're moving their money elsewhere.
If AI demand is coming, shouldn't that eventually turn things around?
It should, and brokerages think it will. But "eventually" is the operative word. The market is pricing in another weak quarter, maybe two. The question is whether investors have the patience to hold through that period waiting for AI to become a real revenue driver.