While several firms are exposed to evolving US policies that could drive up costs and reduce demand, Indian IT giants Tata Consultancy Services (TCS) and Infosys are in a stronger position to absorb the impact.
Moody’s noted that “most corporate sectors where we have rated coverage in South and Southeast Asia are either not significantly exposed to potential US tariffs or have sufficient mitigants to withstand the impact.” These include strong domestic operations, diversified supply chains, and existing US operations.
IT services firms hedge against US policy shifts
While business service providers are not directly subject to tariffs, their exposure lies in “changes in US immigration policy,” Moody’s said, warning that stricter immigration rules could shrink the talent pool for IT firms.
Nearly 75% of H-1B visas issued in 2023 went to Indian nationals, underscoring the industry’s reliance on skilled foreign workers.
To minimise disruptions, “companies such as Tata Consultancy Services Limited (TCS), Infosys and Hexaware Technologies… have gradually increased onshore hiring in the US,” the report said. Moody’s highlighted that TCS and Infosys, with their industry-leading profitability, are better positioned to absorb increased costs.
Infosys valuation premium narrows
Seperately, Infosys, historically trading at a premium among Indian IT majors, has seen its valuation edge erode. The stock now trades at 21.9 times its one-year forward earnings, below TCS (23.2x) and HCL Technologies (22x), as per Bloomberg data.
Also read: Infosys valuations fall below peers TCS, HCLTech post recent share price fall
Amid revenue concerns and potential discretionary tech spending cuts, Infosys shares have dropped 16.2% year-to-date, while TCS and HCL Technologies have fallen 15% and 20%, respectively. The Nifty IT Index has tumbled 21%, making it one of the worst-performing sectoral indices.
Adding to pressures, Morgan Stanley this week downgraded Infosys to ‘equal weight’ from ‘overweight,’ its first downgrade in at least four years. The brokerage now prefers TCS over Infosys, Tech Mahindra over HCL Tech, and Coforge over Mphasis.
