Markets
Navigating India’s IT landscape: Stocks to buy amid tariff challenges, recommended by NeoTrader’s Raja Venkatraman
Summary
- Raja Venkatraman suggests three IT stocks to buy this week in the wake of the US' additional tariffs on Indian exports to the country.
India’s information technology (IT) services sector, which has been coping with a slowdown in tech spending in the US, its key market, now faces additional challenges following the US’ additional 26% tariff on Indian products.
Although the tariffs have no direct bearing for India’s IT services sector, they are expected to have far-reaching implications in terms of demand revival, cost strategies, and growth prospects. In this article, Mint analyses the domestic IT sector’s resilience, adaptability, drivers of demand recovery, and strategies for cost stabilization amid hurdles posed by pricing pressures and fluctuating market conditions.
We have selected the following IT stocks to consider this week:
COFORGE
- One should consider going long at dips near ₹5,500-5,550 with a stop below ₹4,900 for a rise towards ₹7,500 in the next 3 months.
PERSISTENT
- With a ‘buy’ possibility unfolding if these levels are held, consider some upside towards ₹5,200 in the next 3 months as long as the ₹3,900 level holds on the downside.
ZENSARTECH
- Any reaction into support zones around ₹610-620 could be a good support zone to buy into this stock for a rise to ₹800 with a stop at ₹580 in the next 3 months.
These candidates have been considered based on a mix of parameters that are plaguing India’s IT Industry.
Below, I have enumerated in brief the sector dynamics and challenges that lie ahead for select stocks from the Indian IT Industry.
Sector dynamics and consolidation
- Impact of the US tariffs: Increased tariffs on Indian exports to the US have raised concerns about cost competitiveness and market access.
- Consolidation trends: Mergers and acquisitions continue as IT firms seek scale and diversification to counter geopolitical uncertainties.
- Shift in market focus: Indian IT firms are exploring alternative markets and partnerships to reduce dependency on the US.
Demand recovery and growth drivers
- Post-pandemic recovery: Digital transformation remains a key driver, but US President Donald Trump’s reciprocal tariffs are expected to further slow discretionary spending on technology by companies in the US.
- Emerging technologies: AI, cloud computing, and cybersecurity continue to fuel demand, offering opportunities for innovation.
- Diversification: Indian IT companies are focusing on expanding into non-US markets to mitigate tariff impacts.
Cost savings and price stabilization
- Cost optimization strategies: Automation, outsourcing, and operational efficiency are being prioritized to counter rising costs.
- Flexible pricing models: Subscription-based and pay-as-you-go models are gaining traction to balance affordability and profitability.
- Global economic factors: Currency fluctuations and inflationary pressures are influencing pricing trends.
Challenges: Demand revival, pricing trends, and growth prospects
- Demand revival: Fluctuating demand in the US due to increased tariffs and economic uncertainties.
- Pricing pressures: Intense competition and tariff-induced cost increases are challenging profitability.
- Growth prospects: Talent shortages, skill gaps, and geopolitical tensions require strategic investments in workforce development and innovation.
- Adaptation to tariffs: Companies are optimizing costs, diversifying suppliers, and increasing automation to sustain growth.
Based on these parameters, I have selected three IT stocks to consider this week:
COFORGE
Coforge’s exposure to US markets under the new tariff regime will likely create significant cost pressures, raising concerns about market access. Since the US contributes to nearly half of Coforge’s revenue, there has to be a shift in the company’s gameplan.
The reciprocal tariffs would indirectly affect India’s IT sector as the move is expected to increase inflation in the US, leading to reduced discretionary spending on technology.
Coforge delivered a strong performance in 2024-25. The company reported a 40.3% year-on-year revenue growth in Q3 FY25, with revenue reaching ₹3,318.2 crore (approximately $397.1 million). Its EBITDA grew by 29.3% year-on-year, reflecting operational efficiency and resilience.
Coforge also secured four large deals in Q3 FY25, showcasing its ability to maintain client confidence and expand its order book, which now stands at $1.37 billion.
Coforge’s strategic focus on emerging technologies such as AI, cloud computing, and cybersecurity has helped it navigate the challenging macroeconomic environment. The company has also diversified its market presence, with growth across the Americas, EMEA (Europe, Middle East, and Africa), and APAC (Asia-Pacific) regions.
The recent erosion in Coforge’s share price after hitting the 5-figure mark highlights the stock’s inability to sustain the profit-booking. After receiving continued selling pressure, we can expect the prices to head towards some important value support region around ₹5,500.
Further, there is a Fibonacci confluence of a retracement support from May 2024 lows to December 2024 highs, combined with the recent 2-point extension, which is forming a Fibonacci confluence at the same levels. These levels ahead of the numbers are offering a good point to arrest the decline, which can produce some genuine buying in this IT counter.
One should consider going long at dips near ₹5,500-5,550 with a stop below ₹4,900 for a rise towards ₹7,500 in the next 3 months.
Looking ahead, Trump’s tariff regime presents hurdles, but Coforge’s robust financial performance, strategic focus on innovation, and strong market positioning indicate promising growth prospects in a challenging global landscape.
PERSISTENT
Persistent Systems, too, would have to face the brunt of the US’ additional tariffs on Indian exports. While this is daunting for companies like Persistent, which relies heavily on US clients for revenue, this situation could trigger some innovation in the company.
Persistent Systems demonstrated resilience in FY25. The company achieved revenue growth of $1.344 billion, marking its 19th consecutive quarter of sequential growth. Persistent’s focus on emerging technologies such as AI, cloud computing, and cybersecurity has helped it maintain a competitive edge. Strategic investments in automation and operational efficiency have also contributed to its ability to navigate macroeconomic uncertainties.
Persistent Systems reported a net profit of ₹372.99 crore in Q3 FY25, reflecting a 14.8% year-on-year increase. Its EBIT margin expanded to 14.9%, showcasing improved operational efficiency. The company has been recognized for its innovative solutions, including AI-powered platforms, which have bolstered its market positioning.
After a stellar run in 2024, when Persistent’s prices went up by more than 50%, supported by steady buying interest and encouraging financials, the negative newsflow is impacting the prices now. As portfolio exits continue to plague this performer, we need to understand that the uncertainty surrounding the tariff cannot persist forever.
However, as we enter this week, the sharp selling pressure would continue to drag Persistent’s prices lower. Based on some Fibonacci projections and retracement confluences, we note that ₹3,950-4,025 offers some credible support. Looking into the next 3 months, a reaction of the trends into these levels could offer us a very low risk opportunity on the long side.
As higher timeframes show limited selling pressure, this support could contain the pessimism that is currently curtailing any revival in this counter. With a ‘buy’ possibility unfolding if these levels are held, one can consider some upside towards ₹5,200 in the next 3 months as long as ₹3,900 level holds on the downside.
In summary, Persistent Systems has shown resilience and adaptability in the face of geopolitical and economic pressures. Its strategic focus on innovation and operational efficiency positions it well for sustained growth in a challenging global environment.
ZENSARTECH
With the US being a vital market for Zensar Technologies, adapting to these changes remains critical for the company. Zensar reported a steady performance in Q3 FY25, showcasing resilience amidst a challenging macroeconomic environment. The company achieved a revenue of $157.0 million, reflecting an 8.6% year-on-year growth in reported currency and 7.5% in constant currency. In FY25, Zensar showcased its ability to weather tough conditions. Furthermore, Zensar’s strong cash reserves of $261.7 million underscore its financial resilience and prudent management.
Zensar’s continued investment in AI, digital transformation, and automation has positioned it well to capture emerging opportunities. The company’s diversified client portfolio across verticals and regions further mitigates risks tied to US-specific tariff issues.
After a strong run seen in 2023 and 2024, the rise mellowed with some profit-booking that dragged Zensar’s prices lower. However, the absence of selling interest has kept the stock holding on above important support regions. As can be observed from the higher timeframe charts, the reaction into the Gann 2x1 support trendline has kept the selling pressure at bay. This line will again come into contention and could act as an important zone in the coming week.
Any reaction around ₹610-620 could be a good support zone to buy into this stock as there are multiple supports emerging at these levels. With bearish momentum not really in the driver’s seat, we could see an emergence of buying interest that can once again spur some upward momentum for an upward target zone towards ₹800 within the next 6 months. Any move below ₹585 violates this scenario.
Overall, while Zensar must navigate the pressures created by the Trump tariffs and global economic shifts, its strategic efforts in innovation, cost optimization, and market diversification are likely to strengthen its position in the competitive IT services landscape.
Outlook: Positioned for growth
While Trump’s reciprocal tariffs have introduced significant challenges for India’s IT sector, the sector's resilience and adaptability, driven by emerging technologies and innovative strategies, position it for continued growth in a dynamic global landscape.
Raja Venkatraman is co-founder, NeoTrader. His Sebi-registered research analyst registration no. is INH000016223.
Investments in securities are subject to market risks. Read all the related documents carefully before investing. Registration granted by Sebi and certification from NISM in no way guarantees performance of the intermediary or provide any assurance of returns to investors.
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before making any investment decisions.
