In a significant market development, shares of Indian IT companies surged on April 11 following US President Donald Trump's announcement of a 90-day pause on reciprocal tariffs against major trading partners. This news provided much-needed relief to the markets, particularly the IT sector, which has been under pressure due to recession concerns and recent global market volatility.

Positive Impact on Nifty IT Index

The immediate impact of Trump's tariff pause was seen on the Nifty IT index, which rose by nearly 1.3% in early trade. The rally was led by Coforge, whose shares jumped almost 4% to Rs 6,571 apiece, followed by strong performances from LTI Mindtree, Mphasis, and Wipro, each gaining more than 2%. Other IT giants like Infosys, HCL Technologies, and Persistent Systems also registered gains close to 2%.

This rally is a welcome change for investors, especially after the Nifty IT index plunged over 10% between April 2 and April 9, amid mounting concerns over trade tensions and global economic slowdown.

Why Trump’s Tariff Pause Matters

On April 9, President Trump rolled back his earlier announcement from April 2, where he had imposed reciprocal tariffs on several countries including India, which faced a 26% tariff on exports to the US. This led to a sharp downturn in global markets and added to the fears of a potential recession in the US, which would significantly impact Indian IT companies dependent on American clients.

The 90-day suspension of these tariffs offers breathing room not just for US companies but also for global partners like India. With India potentially looking to negotiate a partial trade deal with the US during this window, there’s growing optimism about recovery in cross-border IT services demand.

Goldman Sachs Reverses Recession Forecast

Adding to the positive sentiment was the decision by Goldman Sachs to rescind its earlier projection of a 65% probability of a US recession in the next 12 months. The investment bank cited Trump’s tariff pause and renewed trade talks as a stabilising factor for the global economy.

For IT firms, fears of delayed project budgets and reduced IT spending in the US had weighed heavily on stock prices. With this reprieve, clients are likely to resume postponed projects, and the sector could return to a more stable growth trajectory in the near term.

TCS: A Contrasting Picture

Despite the sector-wide rally, Tata Consultancy Services (TCS) stood out by trading in the red, with a marginal dip to Rs 3,215 per share. The decline followed the release of TCS’s Q4 FY25 results, where the company reported a net profit of Rs 12,224 crore, marking a 2% year-on-year decline and missing analyst estimates.

This underperformance weighed on the otherwise positive mood in the sector, reminding investors that fundamental earnings performance still plays a critical role in stock valuations even amidst macroeconomic shifts.

Why Indian IT Sector Reacted Strongly

The Indian IT sector has a significant exposure to the US market, with most firms generating over 50% of their revenues from American clients. Any signs of a slowdown or policy uncertainty in the US directly impact earnings and investor sentiment in India.

The April 2 announcement of new tariffs had created fears of project cancellations, contract renegotiations, and budget cuts by US firms, all of which would have hurt Indian IT players. Hence, Trump’s sudden pivot on April 9 was seen as a positive policy signal.

Moreover, this window opens up diplomatic possibilities for India to engage with the Trump administration and negotiate better terms or exemptions, which can further cushion the sector.

Coforge Leads the Pack

Among the top performers, Coforge stole the spotlight with nearly 4% gains, indicating strong investor confidence in mid-cap IT firms that are more agile and better positioned to capitalise on rapid policy changes. Investors might also be factoring in upside potential from US projects that were put on hold due to tariff uncertainty.

Other firms such as Mphasis, Wipro, and LTI Mindtree saw renewed interest from institutional buyers. These companies have a diversified client base and robust digital offerings, making them attractive in a scenario where clients look to optimise their IT investments.

Short-Term Relief or Long-Term Trend?

While the current rally is largely sentiment-driven, market analysts suggest that the next earnings season will provide a clearer picture of whether this rebound has sustainable legs.

Factors to watch in the coming weeks include:

• US macroeconomic indicators, particularly inflation and GDP growth.

• Progress on US-India trade negotiations.

• Client commentary from US-based enterprises on their IT budgets.

• Any further announcements from Trump’s administration regarding trade policy.

For now, though, the IT sector appears to have received a temporary but meaningful lifeline, which has brought back optimism and investor interest.

Conclusion

To summarise, Trump’s pause on reciprocal tariffs has acted as a market booster, especially for IT stocks heavily exposed to the US economy. With Goldman Sachs stepping back from recession warnings and India looking to engage in proactive trade diplomacy, the sentiment around IT companies has improved significantly.

However, the true test will come in the next quarter, when companies reveal how much of this policy shift has translated into actual deal flows and client spending. For now, though, the Indian IT sector is breathing a sigh of relief, and investors are closely watching every move.

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