New Delhi — India’s IT services sector is beginning to show signs of a gradual recovery, with improving growth visibility and stronger underlying fundamentals, according to a new report by BNP Paribas.
Despite cautious investor sentiment, the report indicates that key indicators are pointing toward a steady rebound in demand and earnings momentum. Factors such as increased hiring activity, stable management outlooks, and continued expansion in cloud-based services are contributing to a more supportive near-term environment.
Another major tailwind for the sector is currency movement. The depreciation of the Indian rupee against the US dollar is expected to boost earnings for IT firms, many of which derive a significant portion of their revenue from overseas markets.
For the March quarter (Q4 FY26), Indian IT companies are projected to post modest sequential revenue growth. However, on a year-on-year basis, growth is expected to appear stronger due to a favourable base effect. Large-cap IT firms are likely to maintain steady performance, while select mid-sized companies could emerge as key growth drivers.
The report also highlights early signs of revival in crucial sectors like technology and telecom, while other verticals continue to remain stable. Profit margins across the industry are expected to stay resilient, largely supported by currency advantages.
Looking ahead, IT majors are anticipated to offer stable revenue growth guidance for FY27. Reflecting improved confidence, BNP Paribas has upgraded its earnings estimates for the sector by around 2 percent for FY27 and FY28, which has also led to higher target price projections.
A notable trend shaping the sector’s future is the rapid adoption of artificial intelligence. Companies are increasingly investing in AI capabilities, forming strategic partnerships with global tech players, and launching new platforms to capitalise on opportunities in generative AI and enterprise solutions—further strengthening the medium-term growth outlook.
With inputs from IANS