How Does US Volatility Affect Indian IT Stocks?
The fortunes of Indian IT firms often shift with changes in the US economy. Companies such as TCS, Infosys, and Wipro earn much of their revenue from American clients. So, when uncertainty rises in the US, whether from interest rate hikes or policy changes, investors back home react quickly. Stock prices may swing, even if nothing changes in the companies. To make better decisions, investors should track global trends. In this article, we look at how US volatility shapes Indian IT stocks.
The US-India IT Nexus
Indian IT firms have a significant reliance on the U.S. market, with companies like Infosys, TCS, Wipro, HCL Technologies, and Tech Mahindra deriving between 50% and 60% of their revenues from the U.S. This dependency underscores the sensitivity of these firms to U.S. economic fluctuations. For instance, in April 2025, the announcement of new U.S. tariffs led to immediate declines in Indian IT stocks:
- TCS fell by 3.13%
- Infosys by 2.64%
- Tech Mahindra by 3.04%
- HCL Technologies by 2.99%.
- Wipro share price by 2%
Such events highlight the direct impact of U.S. policy changes on the performance of Indian IT companies.
Impact of US Market Volatility
The volatility of the U.S. market significantly influences Indian IT stocks due to their deep economic and operational ties. Here’s an in-depth look at how fluctuations in the U.S. market impact Indian IT equities:
1. Revenue Dependency on the U.S.
Indian IT firms, including Wipro, derive a significant portion of their revenue from the U.S. market. This heavy reliance means that fluctuations in U.S. economic conditions, such as interest rate changes or policy shifts, can directly impact these companies’ financial performance.
2. Interest Rate Decisions and Economic Indicators
Interest rate decisions by the U.S. Federal Reserve significantly influence Indian IT stocks. A rate hike often signals tighter liquidity, affecting investor sentiment and reducing foreign inflows. Conversely, stable or reduced rates encourage capital movement into emerging markets like India. Additionally, key U.S. economic indicators like inflation and job data shape market expectations, indirectly impacting revenue forecasts for export-driven Indian IT firms.
3. Trade Policies and Tariffs
U.S. trade policies, particularly tariffs, directly influence Indian IT stocks due to their significant exposure to the American market. In April 2025, the U.S. announced a 26% reciprocal tariff on Indian imports, leading to a nearly 3% decline in the Nifty IT index. These tariffs heightened concerns about reduced client spending and potential delays in technology investments, underscoring the sensitivity of Indian IT stocks to U.S. trade policy shifts.
4. Foreign Institutional Investments (FIIs)
Foreign Institutional Investors (FIIs) closely track U.S. market signals to guide capital flows. Positive sentiment in the U.S. often boosts FII inflows into Indian IT stocks, enhancing valuations. This dynamic directly affects market liquidity and the performance of export-driven Indian tech companies.
5. Currency Exchange Rates
Currency exchange rates significantly influence Indian IT companies, as most of their revenue is earned in U.S. dollars. A stronger dollar boosts profits when converted to rupees, improving margins and stock performance. Conversely, a weakening dollar reduces earnings. thus, fluctuations in USD/INR directly impact investor sentiment and the valuation of IT stocks listed on Indian exchanges.
Conclusion
US market volatility has a strong impact on Indian IT stocks because these companies earn a large part of their revenue from the US. When the US economy faces ups and downs, it directly affects investor confidence and business deals. So, keeping an eye on US trends is key for anyone investing in Indian IT stocks.
