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good morning. Stock markets around the world are still struggling to understand President Donald Trump’s tariffs. The Indian market is also waiting for the Reserve Bank of India’s interest rate announcement tomorrow. We take our eyes off.
India’s southern states are worried as the border freeze will take effect next year. But first, is the golden age of the Indian IT sector over?
India needs to restart
The IT Services sector, once home to the Indian stock market, seems to simply not be able to take a break. Major stocks, including Infosys, HCL Technologies and Tech Mahindra, have already been relatively stifled during the massive bull run of the past two years. They are currently some of the worst affected by Trump’s tariffs. The three stocks closed yesterday at 1,405 (-3.22%), 1,378 (-3.1%) and 1,293 (-2.12%), respectively.
HSBC expects Infosys and HCLTech to release growth guidance of just 2-5% this fiscal year. If sentiment in the US market improves, two Indian groups can touch the top edge of the range, the bank said in a report last week. For the sector as a whole, HSBC expects an increase of 7-9% in earnings per share over the next two years. But the brokerage had already had a faint prospect long before Trump’s announcement last week.
The outsourcing model adopted by large Indian companies providing technology services faces several challenges. The US accounts for at least 50% of these companies’ customer base. As Trump’s trade war drives the US economy into a recession, large American companies tighten their belts and don’t immediately invest in expanding their IT capabilities. This will hit your order form here. In addition, the Indian model depends on sending software engineers from India to overseas client sites for the project. This could be a huge hit from the “America First” policy if the US cuts the number of H-1B visas for skilled foreign workers.
Another major issue in this sector is the so-called Global Capacity Centre, or GCC. Over the past few years, more large multinational companies have opened and run these centres in India. GCC offers offshoring (or proximity) benefits and ensures control while keeping it in-house. India’s high-tech groups, which focus primarily on expansion, are not building moats around their business models, making it easier to swap right now.
In a poll conducted at the Indian Business Briefing on March 25, about 59% of readers said they were trying to buy dip in the high-tech sector market. However, last week’s event will extend uncertainty about these stocks, even before considering other strong headwinds. One example is artificial intelligence. Models that can write complex code will likely quickly replace many human software engineers. With all the indications, the golden age of outsourcing in India appears to have ended.
Do you think Indians will find mojo again? Hit a reply or write to us at indiabrief@ft.com
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South vs North
Next year, the 25-year freeze, which is the “division” will expire. In other words, governments can change how states are represented in parliament to reflect changes in population.
This prospect is concerned about the more prosperous and less populated southern states. Political tensions with the largely BJP-controlled North are already high, with tax redistributions distributed at the central flashpoint. The federal government often evokes “stock principles” when determining how tax revenues are distributed among states, allowing the North to earn more money than that. For every rupee that Tamil Nadu sends to the Centre, now only 30 peases have returned, but Uttar Pradesh will get an RS3.
The boundaries are provided by the constitution, but they are always a troubling issue, with serial governments choosing to postpone it. The last seats in Parliament were allocated in 1973, when India had a population of 548 million.
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The re-closure of population-based seats in 2026 could result in the southern state losing up to 26 seats in the House of Representatives. The principles behind the idea of proportional representation are sound, but India’s biased economic development makes this an unfair exercise. In essence, southern states with superior social and economic development indicators and low population growth will be punished for their success.
The already initiating political slugfest has ed many deep-seated, divisive social issues. These tensions only increase over the next few months. The question is whether Modi’s coalition government considers this political and social instability to be worth the ultimate reward. It is seduction that his BJP finds difficult to resist.
Go to the diagram
As Trump’s response to tariffs continues, we will stick to the stock market here for another edition. On Friday and yesterday, India was less than other markets around the world.
My Mantra
“Before major projects or investments, I like to think about pre-examinations. If things don’t work, what’s the main reason? It allows you to focus on the most important risk mitigators, rather than reacting to a point-in-time situation.”
Harshjit Sethi, Managing Director, Peak XV (formerly Sequoia India)
Each week we invite successful business leaders to teach us the mantras of work and life. Want to know what your boss is thinking? Reply to indiabrief@ft.com and nominate
Simple questions
What do you think about Trump’s tariffs: pure genius or total insanity? Join our poll here.
Buzzer round
On Friday we asked: Founded in the 1800s as an opium trader, the Hong Kong-based company has inspired a novel that has become a film starring Pierce Brosnan?
The answer is. . . Jardine Matheson.
Many of you wrote with the correct answer. (And yes, Noble House was a series, not a film. That’s my mistake.) Some people have become very close to the fastest people, such as Pratic Rannekal, Guru Lalbani, Yaman Singhania, and Padmanaba Mishra. Thank you for participating.
However, dominating buzzer round champion Anir Dutta remains undefeated. For his long-term speed and accuracy, we sent him a small goody bag!
Thank you for reading. Indian Business Briefing is compiled by Tee Zhuo. Send feedback, suggestions (and gossip) to indiabrief@ft.com.
