Is Indian Tech Following NASDAQ Too Closely?

Does Indian tech copy NASDAQ moves?

Introduction

As global markets grapple with rising interest rates, inflation, and shifting tech priorities, a curious relationship continues to unfold — one that links the behemoth NASDAQ-100 index in the U.S. with India’s IT powerhouses. With the NASDAQ seeing its most significant monthly dip in over a year as of May 2025, investors and traders alike are questioning how deeply the tremors are felt across Indian shores. Is this correlation real, consequential, and likely to persist? Let’s unpack this fascinating intersection of global finance, tech demand, and investor psychology.

Expectation vs Reality: US and Indian Tech Sectors

Expectation: 

Indian IT companies, with their robust balance sheets, client diversity, and cost-efficient delivery models, should ideally remain resilient to U.S. volatility. Investors expected Indian tech to provide a hedge or at least partial insulation from NASDAQ swings.

Reality: 

Despite strong fundamentals, Indian IT stocks have mirrored NASDAQ movements closely. In May 2025, the NASDAQ-100 dropped 7.69% amid rate hike fears and weak earnings guidance from U.S. tech giants. Almost in tandem, the NIFTY IT index corrected over 5.5%, with major firms like Infosys, Wipro, and TCS issuing cautious outlooks due to a slowdown in U.S. client spending.

Tabular Analysis: NASDAQ and Indian Tech Sector Performance

Correlation between NASDAQ & Indian tech sectors over the years

The Correlation: What’s Fueling It?

• Revenue Dependence on the US: 50–70% of Indian IT revenue comes from North America. Any slowdown in U.S. tech budgets has a direct impact.

• Market Psychology: NASDAQ is a global barometer of tech appetite. A negative turn there triggers risk-off sentiment globally.

• FII Activity: Foreign Institutional Investors respond to U.S. data and reallocate across geographies, making Indian tech stocks sensitive to global cues.

• Digital Transformation Themes: Trends like AI, cloud computing, and cybersecurity are globally synchronized — when U.S. adoption slows, Indian IT contracts take a hit.

Pros of This Correlation

• Global Visibility: Indian firms gain credibility and alignment with global innovation trends.

• Investment Arbitrage: Traders can exploit predictable lags between NASDAQ and Indian IT.

• Strategic Hedging: Correlation enables sophisticated hedging strategies using ETFs and futures.

Cons of This Correlation

• Vulnerability to External Shocks: Indian tech becomes susceptible to events far beyond its control.

• Reduced Decoupling Appeal: Limits India’s ability to position as a safe haven.

• Short-Term Volatility: Even fundamentally strong companies see erratic price action due to sentiment spillovers.

Personal Opinion

In my view, the correlation is not just a temporary trend — it’s structural. As long as Indian IT remains dependent on U.S. clients for growth, its fortunes will be tethered to Wall Street’s tech pulse. However, selective decoupling is possible through diversification into Europe and Asia, plus deeper digital product ownership.

Economic Sentiments Around This Link

Near Term (3–6 months): 

Traders are cautious, with a short bias. Investors are waiting for clarity on U.S. rate policy and earnings direction. Volatility remains high.

Long Term (12–24 months): 

Optimism returns. Rate cuts and normalization of tech spending in the U.S. could reignite Indian IT valuations. Long-term structural demand for digital services remains intact.

Final Verdict

The Indian tech sector and NASDAQ are indeed dancing to a similar rhythm — sometimes gracefully, sometimes shakily. While the correlation creates short-term challenges, it also offers savvy investors a valuable window into global tech sentiment. For traders and long-term investors alike, understanding this relationship isn’t just smart — it’s essential.