As the US President stoked expectations of a corporate tax rate cut and the ensuing rise in corporations’ discretionary spending and IT budget, Indian IT majors are expected to see mid-to high-single-digit growth over the coming quarters, indicating a slower-than-expected recovery, according to brokerage firm CLSA.
The brokerage adopted a cautiously optimistic outlook due to the sector’s ongoing structural challenges, according to investment analyst Sumeet Jain. These challenges include budgets shifting from information technology (IT) services to software, the rise of global capability centers (GCCs), and the growing market share of the India arms of multinational IT companies like Accenture and Capgemini.
In contrast to street traders who forecast double-digit growth, the business estimated that IT majors like Tata Consultancy Services, Infosys, and Wipro would grow at a pace of between 6% and 8%.
According to industry association Nasscom, India’s $254 billion IT sector, which contributes $80 billion to the US GDP overall, has the largest market in the US. Following Trump’s election, the market surged on the expectation that lower tax rates would lead to more discretionary spending, which would then result in larger IT budgets for these businesses.
Although the first half of the current fiscal year has seen a comeback for IT firms compared to FY24, the picture for the remainder of the year is still bleak because Q3 saw more furloughs and fewer working days for clients in North America and Europe.
Furthermore, even though the top six IT companies TCS, Wipro, Infosys, TechM, HCLTech, and LTIMindtree (as defined by CLSA) now account for 41% of all Indian IT exports, down from 47% in FY12, the penetration of Indian IT exports with international IT markets has begun to plateau. However, the rivalry has increased as the Indian divisions of multinational IT companies like Accenture and Capgemini have begun to perform better in the nation.
