The Indian IT industry is projected to experience a revenue growth of 4-5% in FY27, leading to high-single-digit EPS growth, as per a report by HSBC Global Investment Research. Despite a 15% increase in IT stocks from their lows, the report suggests that they may perform in line with the market in 2026. The research firm mentioned that the IT sector’s long-term stock return trajectory is now lower than before, indicating a shift from double-digit compounding.
The report anticipates IT stocks to become more cyclical, necessitating active management of top-tier companies around their cycles and volatility. It also suggests that a potential cyclical rebound in CY26 or FY27 could further boost IT stocks beyond their recent performance. The report highlighted the impact of weak seasons on 3QFY26, stating that it is unlikely to yield positive surprises and pointing out mixed signals at the company level.
Yogesh Aggarwal, Head of Research at HSBC India, expressed that the expectation for IT to outperform the market in 2026 was based on factors like growth improvement, favorable valuations, and a sector AI moderation. IT stocks saw a rise of approximately 15-20% between October-December 2025 compared to a 6% return on Nifty, indicating an incorporation of expected fundamental improvements in CY2026 or FY27. The report also mentioned positive signals from IT industry customers regarding business outlook and increased willingness to invest in IT.
Motilal Oswal Financial Services, in its recent report, expressed optimism on IT services from a medium-term perspective, citing a gradual recovery in global technology spending alongside a focus on digital transformation, AI, and efficiency-led adoption.
