IT Stocks Under Pressure: Why Infosys, TCS, HCLTech Fall

Indian IT stocks are under pressure as investors reassess the sector’s growth outlook, AI-driven disruption and rising costs of serving overseas clients. Infosys, TCS and HCLTech have all faced selling pressure, with the broader Nifty IT index also weakening. On August 25, concerns around a proposed sharp increase in the US H-1B visa fee added another layer of uncertainty for Indian technology companies that rely heavily on skilled professionals serving US clients. The key takeaway for investors is that the current weakness is being driven by a combination of structural concerns and near-term sentiment, rather than one company-specific issue.

Why Are IT Stocks Falling?

The latest pressure on Indian IT stocks comes as investors assess how changes in the global technology-services business could affect revenue growth and margins.

Indian IT companies generate a large portion of their revenue from overseas clients, particularly in the US and Europe. That makes them sensitive to global technology spending, client budgets, currency movements and regulatory changes affecting the movement of skilled employees.

The sector is also undergoing a broader transformation because of artificial intelligence. Traditional software-development work is increasingly being automated, while clients are demanding more output for similar or lower spending. This is changing how technology companies price contracts and measure productivity.

US H-1B Fee Proposal Adds Fresh Pressure

One of the immediate concerns for the sector is a proposal from the US Department of Homeland Security to introduce a $103,265 fee on H-1B cap-subject petitions.

The H-1B programme is important for Indian IT companies because it allows them to deploy specialised employees to US client locations. A substantial increase in the cost of obtaining these visas could therefore affect staffing strategies and operating expenses.

Companies could respond by increasing local US hiring, moving more work offshore or changing the mix of employees deployed on-site. However, the eventual financial impact will depend on the final policy, its implementation and any exemptions or legal developments.

This is why investors are treating the proposal as a potential margin and cost issue rather than assuming an immediate earnings hit.

AI Is Changing the Indian IT Services Model

The larger issue is artificial intelligence.

Generative AI and automation are changing the economics of software services. Tasks that previously required large teams of entry-level programmers can increasingly be completed with AI-assisted tools.

That does not necessarily mean demand for Indian IT services disappears. Instead, the nature of demand is changing. Clients increasingly want companies to help implement AI, modernise systems, analyse data and deliver measurable business outcomes.

Reuters recently reported that major Indian IT companies, including TCS, Infosys and HCLTech, are moving towards performance-based contracts as clients demand greater productivity at lower costs. This shift can create new opportunities, but it can also put pressure on traditional billing models.

TCS: Why Investors Are Cautious

TCS remains India’s largest IT services company, but its size also means that investors expect consistent growth.

The company faces the same industry-wide questions around AI adoption, discretionary technology spending and pricing. A key issue is whether AI will ultimately create enough new technology demand to offset pressure on traditional services.

TCS has been responding through AI capabilities, strategic partnerships and acquisitions. Investors will therefore be watching deal wins, large contract values, revenue growth and margins to determine whether these investments are translating into sustainable business momentum.

The stock’s weakness should not automatically be interpreted as a deterioration in the company’s long-term business. Instead, investors are reassessing what growth rates and margins are realistic in an AI-driven environment.

Infosys: Growth and Margin Expectations Matter

Infosys is facing similar concerns. The company’s exposure to the US market makes it sensitive to client technology budgets, while the H-1B issue adds uncertainty around the cost of deploying employees in America.

Another important factor is the balance between AI opportunities and traditional services. Infosys can potentially benefit from rising demand for AI implementation and digital transformation, but clients may simultaneously use AI to reduce the amount of human effort required for certain projects.

For investors, this makes revenue growth, large deal wins, utilisation, margins and management guidance particularly important.

HCLTech: AI and Enterprise Spending in Focus

HCLTech has a somewhat different business mix, including strong exposure to engineering and infrastructure-related technology services. Even so, it remains exposed to the same broad global IT spending cycle.

On August 25, HCLTech shares were trading around ₹1,302, down about 1.4% in morning trade, according to market data. The stock was also down around 18.6% for the year at that point, illustrating how much pressure large IT names have faced in 2026.

Investors will be watching whether enterprise technology spending improves and whether HCLTech can maintain margins while investing in AI capabilities.

Is the IT Sector Facing a Demand Problem?

There is a distinction between weak demand and changing demand.

Global companies continue to spend heavily on technology. However, the composition of that spending is changing. Businesses increasingly want projects that generate measurable cost savings or revenue benefits rather than simply expanding technology teams.

This creates both opportunities and risks for Indian IT firms.

Companies that successfully shift towards AI-led transformation, cloud, cybersecurity and outcome-based contracts could capture new business. At the same time, companies that remain overly dependent on traditional labour-intensive services could face pricing pressure.

What Does a Weaker Rupee Mean for IT Stocks?

Currency movements provide another important factor.

A weaker rupee can benefit Indian IT companies because much of their revenue is earned in foreign currencies. When those dollars or euros are converted into rupees, the reported revenue can increase.

However, currency gains cannot completely offset weaker underlying demand. Companies also have foreign-currency expenses and use hedging strategies, so the impact varies from one company to another.

This means investors should distinguish between growth caused by currency translation and genuine improvement in constant-currency business performance.

Opportunities and Risks for Investors

The current correction could create opportunities if valuations become more attractive and the industry’s long-term demand remains intact. AI adoption itself could become a new source of revenue as enterprises need help implementing and integrating new technologies.

But risks remain significant. These include slower US technology spending, AI-driven pricing pressure, higher employee costs, H-1B restrictions, stronger competition from global technology companies and weaker discretionary spending by clients.

The sector’s historical reputation for stable cash generation does not eliminate these risks.

What Should Investors Watch Next?

Investors tracking Infosys, TCS and HCLTech shares should focus on more than daily price movements. Important indicators include:

• Large deal wins and total contract value
• Constant-currency revenue growth
• Operating margins
• US technology spending
• AI-related revenue
• Employee utilisation and hiring
• H-1B policy developments
• Management guidance
• Client spending in banking, retail and other major verticals

Quarterly results and management commentary will be particularly important in determining whether current concerns are temporary or represent a deeper change in the sector.

Conclusion

The pressure on Infosys, TCS and HCLTech reflects a broader reset in expectations for Indian IT stocks. AI is changing the traditional outsourcing model, while the proposed US H-1B fee increase has created fresh concerns about the cost of serving American clients.

However, the story is not simply about declining technology demand. Indian IT companies are also positioned to participate in enterprise AI adoption, cloud transformation and digital modernisation. For investors, the key question is whether these new opportunities can offset slower traditional services growth and margin pressure. The answer will become clearer through deal wins, earnings, margins and management guidance over the coming quarters.

Frequently Asked Questions

1. Why are Indian IT stocks falling?

Indian IT stocks are under pressure because investors are concerned about slower global technology spending, AI-driven disruption, pricing pressure and higher costs associated with serving overseas clients. On August 25, concerns about a proposed $103,265 H-1B petition fee in the US added another source of uncertainty for companies such as TCS, Infosys and HCLTech.

2. Why are Infosys, TCS and HCLTech affected by the H-1B issue?

These companies have significant operations and client relationships in the US and use skilled employees to deliver services to American customers. A major increase in H-1B-related costs could raise the expense of deploying workers in the US, potentially affecting margins and staffing strategies. The eventual impact will depend on the final policy and its implementation.

3. Is AI a threat to Indian IT companies?

AI is both a risk and an opportunity. Automation can reduce the amount of labour required for certain traditional software tasks, putting pressure on conventional billing models. At the same time, businesses need technology partners to implement AI, modernise systems and integrate new tools. Companies that adapt successfully could benefit from this transition.

4. Why is TCS under pressure?

TCS is facing the same sector-wide concerns around AI disruption, global technology spending and pricing. Investors are also assessing whether the company’s large scale can continue to produce strong growth in a changing services environment. Deal wins, margins, AI adoption and management guidance remain important indicators for assessing its outlook.

5. Why is Infosys share price under pressure?

Infosys is exposed to US and European technology spending, making it sensitive to changes in client budgets. Investors are also assessing the impact of AI on traditional services and the potential cost implications of US immigration policy. The company’s revenue growth, margins, deal wins and guidance are therefore key factors to monitor.

6. Why is HCLTech stock falling?

HCLTech is being affected by broader weakness across Indian IT stocks, including concerns about global enterprise technology spending, AI-led changes and regulatory uncertainty in the US. Its engineering and infrastructure-services exposure provides some differentiation, but the company remains linked to the overall technology spending cycle.

7. Can a weak rupee benefit Indian IT stocks?

Yes, a weaker rupee can support the reported rupee value of overseas revenue because many Indian IT companies earn substantial income in dollars and other foreign currencies. However, the benefit depends on hedging, foreign-currency expenses and underlying business growth. Currency depreciation cannot fully compensate for a sustained slowdown in client demand.

8. Is the current IT stock correction temporary?

It is too early to determine whether the correction is temporary or part of a longer sectoral adjustment. The answer will depend on global technology spending, AI adoption, deal activity, margins and regulatory developments. Investors should watch quarterly results and management commentary rather than drawing conclusions from a few sessions of share-price movement.

9. What should investors watch in IT stocks?

Investors should monitor constant-currency revenue growth, large deal wins, operating margins, AI-related business, employee utilisation, client spending and management guidance. US immigration policies are also relevant because changes to H-1B costs could affect the way Indian technology companies deploy skilled workers.

10. Does falling IT stock prices mean they are undervalued?

Not necessarily. A falling share price can make valuations more attractive, but investors must compare the current price with realistic earnings and growth expectations. If structural challenges such as slower growth or AI-driven pricing pressure reduce future earnings, a lower share price may not automatically mean the stock is undervalued.

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