NIFTY IT opens 1.7% lower on weak TCS results and commentary

IT stocks take a plunge on Friday morning amid broader weakness and renewed headwinds for the sector, soured investor sentiments. The NIFTY IT index traded over 1.2% lower on Friday morning at 37,884. 8 out of the 10 index constituents traded in red, except for Mphasis and OFSS which were trading 0.6% & 0.3% higher on Friday morning.

On the downside, TCS (-1.8%), Infosys (-1.7%), Wipro (-1.5%), Tech Mahindra (-0.9%), and HCL Tech (-0.77%) were the key laggards on the index. The downward trend was largely triggered by the weak opening of Q1FY26 earnings season by the country’s largest technology player, TCS.

TCS Q1FY26 snapshot

The country's largest IT services company on Thursday reported a 6% growth in the June quarter (Q1 FY26) net profit at ₹12,760 crore, helped by a jump in non-core income even as revenues grew at a tepid pace. The revenue in constant currency terms declined 3.1% YoY and jumped 1.3% in rupee terms to ₹63,437 crore. Despite the weak topline, the company managed to expand operating margins by 30 bps to 24.5% due to the absence of salary hikes and lower employee absorption. The positive currency adjustments also helped in maintaining the margins intact.

Weak commentary soured broader industry sentiments

Being the largest technology player and the largest employer in the industry, TCS’s comments on the outlook for the industry. while announcing the June quarter (Q1 FY26) numbers, admitted that the company was experiencing a "demand contraction" due to the continuing uncertainties on the macroeconomic and geopolitical fronts and added that it does not see a double-digit revenue growth in FY26.

Krithivasan explained that the delays in decision-making experienced in the preceding quarter have "intensified" now and hoped for the discretionary spends – a prime mover of revenue growth for IT companies – to return once the uncertainties ebb.