TCS's job cuts send shockwaves through IT sector, shares tumble
What's the story
Shares of major IT companies, including Infosys and Wipro, fell by up to 3% on Monday. The decline follows Tata Consultancy Services' (TCS) announcement of cutting 2% of its global workforce—around 12,000 employees—due to ongoing macroeconomic challenges and weak discretionary spending. The Nifty IT index also fell by 1.6%, deepening losses in an already bearish sector.
Market reaction
TCS clarifies layoffs not due to AI-related efficiency
The news of TCS's job cuts led to a decline in its shares by 1.7% to ₹3,081.6. The company said it can no longer redeploy employees whose skills do not match its changing business needs. "The deployment of some associates may no longer be feasible under current market conditions," TCS stated, clarifying that the layoffs are not due to AI-related efficiency but structural realignment.
Sector impact
Wipro, Infosys shares fall up to 3%
Following TCS's announcement, shares of other major IT companies also took a hit. Wipro's shares fell by 3.5% to ₹250.05 and Infosys's shares slipped by 2.2% to ₹1,482.50. HCL Tech and Tech Mahindra also witnessed minor declines in their respective share prices. The Nifty IT index is currently trading at a whopping 24% discount from its recent peak of 46,088.9.
Policy changes
Job cuts mainly affect middle and senior grades
The job cuts at TCS will mainly affect middle and senior grades as clients remain cautious amid trade tensions and a global slowdown in technology spending. The move comes after legal complaints over TCS's recently revised "bench policy," which allows only 35 unassigned days annually before performance-related action is taken, and mandates a minimum of 225 billable days per year.
Future plans
TCS reaffirms commitment to long-term priorities
Despite the current challenges, TCS has reiterated its commitment to long-term priorities such as investing in new-age technologies, AI deployments, deeper global partnerships, and building next-generation infrastructure. The company said it is handling the transition with care to ensure continuity of client services. Affected employees will be provided full notice-period salary, severance pay, insurance extensions, outplacement services, counseling support and transition assistance.