Global risks dampen outlook for Indian IT sector stocks: Report

Sentiment towards India’s IT sector stocks has turned more bearish amid rising global uncertainties, although investors remain hesitant to take strong directional bets, a report said on Friday.

BNP Paribas India said that while uncertainty has increased, investors — particularly hedge funds — are avoiding clear market calls and are instead reducing exposure by trimming positions in IT sector stocks.

The report noted that recent volatility, including rapid reversals in US trade tariff policies, has made investors cautious about taking aggressive positions in IT sector stocks. However, sentiment towards India has weakened, with concerns emerging over potential earnings pressure on IT sector stocks due to limited availability of liquefied natural gas (LNG).

“While crude oil volatility is being seen as a temporary shock, the persistence of LNG supply constraints is viewed as a more structural risk for Indian companies, including IT sector stocks,” the report said.

The report pointed out that while bearishness on IT sector stocks remains, near-term pessimism may have bottomed out.

Long-only investors remain sceptical about long-term growth prospects of IT sector stocks, with some factoring in scenarios of margin compression.