Indian IT stocks recovering amid rising outsourcing demand

NEW DELHI, INDIA — India’s IT stocks are showing promising signs of recovery, driven by a resurgence in outsourcing demand from key markets such as the United States and Europe.
BSE Infotech Index shows strong performance
Over the past three months, the BSE Infotech index has surged by 15.9%, making it the third-best-performing sector after the 20.9% rise in the BSE Healthcare index and the 16.6% increase in the BSE FMCG index.
Major IT companies like Tata Consultancy Services, Infosys, HCL Technologies, Tech Mahindra, and LTIMindtree have posted double-digit returns, with Wipro being an exception at a 6.5% gain.
Accenture’s positive outlook boosts confidence
Accenture, a global leader in IT services, has further bolstered optimism by revising its full-year revenue and operating margin guidance upwards. The company reported inline numbers for its fourth quarter ending August 2024 and raised its FY25 revenue growth forecast to 3-6% in constant currency, up from the previous 1.5-2.5%. Accenture also increased its operating margin guidance to 15.6-15.8%, citing improved economic conditions and heightened client engagement.
Accenture’s robust performance is highlighted by its record-breaking $81.2 billion in new bookings for the year, with $20.1 billion secured in the fourth quarter alone. This trend aligns with the strong deal wins reported by Indian IT exporters in recent quarters.
Analysts predict growth in IT sector
Analysts are increasingly optimistic about the sector’s growth prospects.
Motilal Oswal Financial Services noted that Accenture’s guidance and deal bookings indicate a positive shift for the industry. “We believe the guidance, deal bookings, and overall commentary have turned the corner, which bodes well for the sector,” he added.
Axis Securities echoed this sentiment, highlighting Accenture’s resilient fourth-quarter bookings as a sign of robust demand despite economic uncertainties. The brokerage emphasized Accenture’s strong client relationships, particularly with its top 30 clients contributing around $100 million in quarterly bookings.
Future prospects brighten for Indian IT firms
While short-term challenges may temper performance for Indian IT exporters in the September quarter, analysts expect conditions to improve as clients finalize their IT budgets for 2025.
Motilal Oswal expressed confidence that any variance in revenue growth for Indian IT services companies would not significantly impact estimates or valuations.
As client spending behavior evolves positively, there is potential for a return to modernization and discretionary projects, signaling a brighter outlook for India’s IT sector as it enters the new year.