IT stocks slide as US fiscal woes cast a shadow

The Nifty IT index dropped 1.16%, closing at 37,105.65. Among the notable laggards were Persistent Systems (down 1.93%), Oracle Financial Services Software (down 1.71%), Tech Mahindra (down 1.62%), Wipro (down 1.54%), HCL Technologies (down 1.39%), Tata Consultancy Services (down 1.2%), Infosys (down 0.98%), Coforge (down 0.6%), and Mphasis (down 0.57%).

Investors are wary that continued fiscal slippage could spell trouble for discretionary IT spending by US-based clients, a key revenue stream for Indian IT companies.

Driving the concern is a fresh budget proposal from US lawmakers, featuring new tax cuts. Former President Donald Trump is championing an extension of his 2017 tax cuts, which analysts warn could add trillions to the federal government's already massive $36.2 trillion debt pile. The plan has sparked fears of an even wider deficit, especially as interest payments continue to soar.

Adding fuel to the fire was last week's move by Moody's to downgrade the US government's credit outlook. On May 17, the ratings agency trimmed the US rating from AAA to AA1, citing Washington's decade-long inability to rein in its rising debt and the growing cost of servicing it ' now markedly higher than that of peer nations.

For Indian IT firms heavily reliant on the US market, these macro tremors could translate into headwinds for deal-making, client budgets, and long-term growth visibility.

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