India’s IT services sector is displaying early signs of recovery, as per a recent report. The data compiled by BNP Paribas indicates an improvement in growth visibility and strengthening fundamentals. Despite cautious investor sentiment, underlying indicators point towards a gradual rebound in demand and earnings momentum.
The report highlights that near-term trends are becoming more supportive, driven by increasing hiring activity, consistent management commentary, and continuous growth in cloud revenues. Additionally, favorable currency movements, especially the depreciation of the Indian rupee against the US dollar, are further bolstering the sector’s earnings outlook.
For the March quarter (Q4 FY26), Indian IT companies are expected to achieve modest sequential revenue growth, resulting in a more significant year-on-year expansion due to a favorable base. While large-cap firms are anticipated to maintain stable performance, select midcap companies might lead the growth trajectory.
Furthermore, the report identifies early signs of recovery in key verticals like technology and telecom, while other segments remain steady. Margin performance across the sector is projected to stay resilient, primarily supported by currency tailwinds.
Looking forward, major IT firms are likely to provide steady revenue growth guidance for FY27, according to the report. BNP Paribas has raised its earnings estimates for the sector by approximately 2% for FY27 and FY28, attributing this to the positive impact of currency movements. This adjustment has also resulted in an increase in target prices, reinforcing confidence in the sector’s medium-term prospects.
The report also emphasizes the strong momentum in artificial intelligence (AI) adoption and strategic collaborations among global IT companies. Leading firms are actively enhancing their AI capabilities through partnerships with major technology players and introducing new platforms to capitalize on emerging opportunities in generative AI and enterprise solutions.
