Indian Stocks Face Tariff Storms and Tech Earnings Dip

Indian stocks opened with cautious optimism, though investor sentiment remained subdued. GIFT Nifty futures suggested a positive start, but trade policy shifts and corporate earnings results weighed on the market. New preliminary countervailing duties from the U.S. on Indian solar products, along with a market reaction to Infosys's quarterly results, created a split in sector performance and investor confidence.

US Solar Tariffs Threaten Exports; Infosys Earnings Miss Investor Hopes

The U.S. Commerce Department's preliminary countervailing duties on Indian solar imports will significantly affect the nation's renewable energy exports. Duties set at 125.87% for Indian products are expected to severely hurt the competitiveness of Indian solar manufacturers in the U.S. market. The U.S. represented about two-thirds of India's solar imports to the U.S. in 2025, valued at $4.5 billion. This comes after a trade deal in February 2026 that had offered temporary tariff reductions. The immediate effect could be a sharp drop in export volumes and profits for Indian solar companies, which have heavily relied on the U.S. as a major export market.

Meanwhile, India's IT sector faced a setback. Infosys reported Q4 FY26 earnings per share of $0.23 and revenue of $5.04 billion, beating analyst expectations. However, its American Depository Receipts (ADRs) fell 5.49% in pre-market trading. This indicates that even strong results may not satisfy investors amid broader sector concerns or changing risk appetite. Infosys forecasts revenue growth of 1.5% to 3.5% in constant currency for FY27, suggesting a tougher growth period ahead.

Sector Valuations and Investor Flows Amidst Trade Uncertainty

Major Indian IT companies are currently valued with P/E ratios around 18.25 for Infosys, 16.13 for Wipro, and 17.73 for TCS. These valuations compare to Accenture at 15.6 and IBM at 22.2. The market's cool reception to Infosys's earnings implies investors are more closely examining growth and margin stability, particularly with the projected FY27 revenue growth of 1.5-3.5%.

U.S. solar tariffs are not new; past actions have disrupted global solar trade and caused significant export drops for other Asian countries. India's own solar exports to the U.S. have reportedly dropped 35% after earlier tariff increases. Indian manufacturers, with capacity beyond domestic needs, must now find new markets or boost local use. This situation also highlights India's dependence on Chinese suppliers for solar cells and wafers, increasing supply chain risks.

Regarding market flows, Foreign Institutional Investors (FIIs) have been net sellers throughout 2026, withdrawing about ₹39,224 crore in April. In contrast, Domestic Institutional Investors (DIIs) have remained net buyers, investing around ₹29,696 crore in April, providing a key stabilizing role against foreign selling. On April 23, 2026, FIIs sold ₹3,254.71 crore net, while DIIs bought ₹941.35 crore.

Key Risks for India's Solar and IT Sectors

The main risk for India's solar sector is the U.S. countervailing duties, making Indian products too costly and potentially unviable in the U.S. market. Relying heavily on this single export market, which has historically bought nearly 95% of India's solar module exports, exposes the industry to significant ups and downs. The sector's reliance on Chinese suppliers for solar cells adds to supply chain risks.

For the IT sector, slowing growth, as shown by Infosys's FY27 forecast, along with ongoing competition and pressure on profit margins, pose challenges. While not directly tied to current events, past allegations against Infosys regarding visa and tax fraud in the U.S., along with concerns over malfunctioning government websites, are noted background risks. The continued difference between FII and DII flows, with foreign investors consistently selling, indicates a wider cautious global view on emerging markets, which could affect overall market liquidity and values.

Outlook for IT and Renewables Amid Trade Shifts

Infosys forecasts revenue growth of 1.5% to 3.5% in constant currency for fiscal year 2027, with operating margins projected at 20% to 22%. While within this range, these figures show slower growth compared to previous periods.

India's renewable energy sector, despite facing challenges from U.S. tariffs, is still aiming for its 500 GW non-fossil capacity target by 2030. The government is boosting its Production Linked Incentive (PLI) schemes to strengthen domestic manufacturing. Success in both the IT and renewable energy sectors will depend on managing complex global trade policies and changing demand.