Escalation of tariff war will delay recovery of Indian IT sector- Report

Delhi Delhi: A report by Mirae Asset Sharekhan said that rate cuts and escalation of tariff wars will weigh on sentiments in the near term and delay the recovery of the information technology (IT) sector. In the short term, both global and domestic factors will impact the recovery of the IT sector, the report said. However, the report said the medium and long-term outlook for Indian IT companies remains positive as enterprises are expected to gradually increase their discretionary spending. Management comments reflect a gradually improving macro environment, with discretionary spending seeing green shoots, especially in banking, financial services and insurance (BFSI), while the deal pipeline remains robust, the report said. IT companies are expected to engage in large-scale transformational programmes to remain relevant and agile in the emerging technology and AI-driven landscape, the report said.

In terms of revenue trends, tier-1 IT companies reported constant currency (CC) revenue growth of 0-3.8 per cent quarter-on-quarter (q-o-q), impacted by seasonality and holidays, according to the report. However, most tier-2 IT companies, bypassing Q3 seasonality, showed more resilience and reported stronger revenue growth than their larger peers. Most tier-1 IT companies witnessed an increase in EBIT margin sequentially, aided largely by operational efficiencies from margin improvement programmes despite the impact of salary hikes by some, the report said. Tier-2 IT companies reported a mixed EBIT margin trend on a sequential basis, according to the report. In terms of deal win momentum, which refers to the pace of closing sales deals and the positive trend, the report pointed out that deal win momentum, which refers to the pace of closing sales deals and the positive trend, has improved for most IT services companies on a year-on-year basis.