India's Tech Sector Braces for Slowdown

India's technology sector is bracing for a potential slowdown in growth after the historic U.S. credit downgrade over the weekend, which heightened fears of a double-dip recession in the largest outsourcing market and sparked a sell-off in IT stocks.

Indian technology companies earn more than 80% of their revenue from the U.S. and Europe. Coupled with a full-blown debt crisis looming over Europe, the Standard & Poor's downgrade of the U.S. debt rating is raising concerns of a return to the recessionary times of 2008, when the local software industry bore the brunt of lower spending by cash-strapped clients. The Bombay Stock Exchange technology index closed 4.3% lower Monday, leading the 1.8% downfall in the broader Sensex. The downgrade may lead to a slowdown in business in the immediate term, Shami Khorana, president of the Americas division of HCL Technologies Ltd., said late Sunday. Clients in the U.S. might feel cost pressures immediately and go slow in their spending decisions, Mr. Khorana added.