This Sector Is Turning Out To Be Perfect Hedge Against Donald Trump Uncertainty

The benchmark index was held up primarily by IT stocks, which contributed 396 points to the Nifty during this period. The outperformance of the tech stocks is turning out to be the perfect hedge against global volatility, especially the Trump-led volatility. The Nifty IT has risen by nearly 30% this year and over 17% since the middle of July.

Infosys Ltd. and HCLTech Ltd. have been the top outperformers within the software pack, together accounting for nearly 300 points contribution to the Nifty since mid-July.

Bluechip IT stocks like Tata Consultancy Services Ltd. have risen by 5.85%, in comparison to Infosys Ltd., which has risen by nearly 16% and HCLTech which has risen by 24.8% since the middle of July. The outperformance has been starker for mid-cap IT companies like Persistent Systems Ltd., and Coforge Ltd.

The benchmark index was held up primarily by IT stocks, which contributed 396 points to the Nifty during this period. The outperformance of the tech stocks is turning out to be the perfect hedge against global volatility, especially the Trump-led volatility. The Nifty IT has risen by nearly 30% this year and over 17% since the middle of July.

Infosys Ltd. and HCLTech Ltd. have been the top outperformers within the software pack, together accounting for nearly 300 points contribution to the Nifty since mid-July.

Bluechip IT stocks like Tata Consultancy Services Ltd. have risen by 5.85%, in comparison to Infosys Ltd., which has risen by nearly 16% and HCLTech which has risen by 24.8% since the middle of July. The outperformance has been starker for mid-cap IT companies like Persistent Systems Ltd., and Coforge Ltd.

While the market is divided over the timeline for revival in the tech stocks, the outlook for IT makes the sector perfect hedge for global uncertainty and Trump actions.

The IT sector is likely to witness improved demand, led by an increase in IT spending in 2025. Trump's promise to reduce taxes for corporates is expected to spur demand for technology spends. The improvement in the US economy and resulting revival in labour market also points to economic activity that would drive demand for IT services.

The IT sector has, over the last seven to eight years, moved away from dependence on work visas for its employees, though offshoring has either increased or remained at the same level. Hiring by many of the IT companies has been onshore and linked to sales, marketing and last-mile client servicing. That has ensured that margins remain stable for the IT companies in the last few years. Demand is expected to revive BFSI space, but global capabilities centers established by many of the Fortune 500 companies have also created challenges for the IT companies’ revenues.

The next financial year growth will be in lower base, and hence the stocks have already run up in anticipation of growth revival.

The Indian IT sector is also witnessing a slow pick up in orders in the artificial intelligence segments. The deals are nominal in nature and inbuilt as part of the larger deals. The pickup in AI specific deals is a couple of quarters away and are expected to come only when companies decide to implement the entire process value chain through AI. Till then, it will be sporadic and plug in modules.

Despite these challenges the IT sector is well placed to manage global headwinds.