The IT index is down ~20% YTD, reflecting higher level of uncertainty caused by the Trump reciprocal tariffs. The brokerage has moderated its growth estimates to account for a weak exit to FY25E and a modest start to FY26E. ER&D companies' growth for FY26E is likely to moderate due to a potential slowdown in the transportation vertical (global OEMs). Growth dispersion between companies is expected to remain high even in FY26E.
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The IT sector is anticipated to report a weak exit for FY25E and provide unexciting guidance for FY26E amid rising global uncertainty. The macroeconomic slowdown has become a baseline scenario, with lower discretionary spending and elongated deal cycles impacting the pace of recovery.
The deal activity will be centred more around cost optimization/takeout initiatives. GenAI is taking centre stage but also driving pricing changes as enterprises and hyperscalers integrate AIefficiency into their pricing models.
We remain watchful and maintain our selective stance on the sector, favoring TCS within tier-1s and Persistent, LTIMindtree, and Mastek among mid-tier IT companies.
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