Will the IT Sector See Growth in 2026? Here Is What Macquarie’s Ravi Menon Has To Say

After a muted two-year stretch marked by delayed client spending, cost-cutting cycles and macro uncertainty, the Indian IT services sector is finally showing signs of a bottoming out. According to Ravi Menon, IT Services Analyst at Macquarie Capital, 2026 could mark a clear turnaround year for some of the companies in the industry, driven by early signs of recovery in key verticals and a gradual revival in project pipelines.

Menon in an interview with NDTV Profit said he prefers a calibrated, stock-specific stance rather than a blanket bullish call on the sector. Among large caps, he sees the strongest opportunity in Tata Consultancy Services Ltd. and HCLTech.

According to him, TCS looks attractive from a one-year perspective, given its defensive positioning, stable deal pipeline and diversified client base. HCLTech is better placed from a three-to-five-year horizon, supported by its strong engineering services business, cloud capabilities and improving margin profile.

Infosys, while still a strong franchise, does not rank as high in his current pecking order.

Menon is bullish on selective midcap IT counters, particularly for Persistent Systems Ltd. and LTIMindtree.

He further added that he expects Persistent and Coforge to grow faster than large-cap peers. This outperformance, he says, will be driven by their smaller base, favourable service mix and ability to capture wallet share in areas where large IT firms have slowed down.

On Mphasis, he takes a more moderate view: growth will likely remain in line with large caps, not ahead of them.

Foreign institutional ownership in IT stocks is currently at the lower end of historical ranges, while domestic institutions are largely underweight as well.

IT also continues to offer strong yield characteristics, which make the sector attractive in periods of uncertainty. However, Menon notes that if the Nasdaq corrects meaningfully, Indian IT valuations may need to be tested for resilience.

Even so, the overall setup, he believes, “leans to the upside.”

The industry has already undergone a cost-cutting cycle, and several small, tactical projects have been completed. This lays the groundwork for a stronger fiscal year 2026.

BFSI and Hi-Tec*, the two segments that cut costs first, are now showing signs of recovery.

Manufacturing and healthcare, however, remain weighed down by tariff uncertainties and may take another six months before seeing meaningful traction.

Overall, Menon believes the sector is at the bottom of its demand cycle, which typically precedes 12–18 months of recovery.