India IT set for fourth year of weak growth on geopolitics, AI risks

After Tata Consultancy Services Ltd. , HCL Technologies Ltd. and Tech Mahindra Ltd. are next to report their quarterly results, letting investors gauge how India’s IT sector is navigating concerns over AI disruption and sluggish client spending.

Growth is expected to be muted as customers remain cautious on discretionary technology projects, though recent results from Accenture Plc offered some encouragement that spending is shifting toward large AI-led transformation projects instead of simply drying up, according to Antique Stock Broking analysts.

On Thursday, TCS beat profit growth expectations, although sequential revenue growth was only 0.5% in constant-currency terms.

“The IT sector has sharply underperformed the markets in the last nine months primarily due to a negative narrative built by Generative AI platform companies compounded by the Gulf war-related uncertainty,” Nuvama said. “We continue to believe the IT services model is here to stay and the Gen AI disruption would only lead to bigger opportunities for them.”

The Trump administration’s latest visa restrictions mounts a new challenge for the sector, after the US said it would suspend an immigration program used by tech firms, mentioning HCL and TCS by name.

The NSE Nifty IT Index has dropped 27% this year, leaving the sector trading at its lowest valuation multiple since the pandemic.