India's IT Sector Shows Signs Of Recovery, Growth Outlook Improves: Report

New Delhi: India’s IT services sector is showing early signs of recovery with improving growth visibility and strengthening fundamentals, a new report said on Monday.

The data compiled by BNP Paribas highlighted that despite cautious investor sentiment, underlying indicators suggest a gradual rebound in demand and earnings momentum.

The brokerage noted that near-term trends are turning more supportive, backed by rising hiring activity, steady management commentary, and continued growth in cloud revenues.

It added that favourable currency movements, particularly the depreciation of the Indian rupee against the US dollar, are further aiding the sector’s earnings outlook.

For the March quarter (Q4 FY26), the report expects Indian IT companies to deliver modest sequential revenue growth, which would translate into a sharper year-on-year expansion due to a favourable base.

Large-cap firms are likely to see stable performance, while select midcap companies could lead the growth trajectory.

The report also pointed to early signs of recovery in key verticals such as technology and telecom, even as other segments remain stable.

Margin performance across the sector is expected to remain resilient, supported largely by currency tailwinds.

Looking ahead, the report projected steady revenue growth guidance from major IT firms for FY27.

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BNP Paribas has also upgraded its earnings estimates for the sector by around 2 per cent for FY27 and FY28, citing the positive impact of currency movements.

This has led to a corresponding increase in target prices -- reinforcing confidence in the sector’s medium-term prospects, as per the report.

The report further highlighted strong momentum in artificial intelligence (AI) adoption and strategic collaborations across global IT companies.

Leading firms are actively expanding their AI capabilities through partnerships with major technology players and launching new platforms to tap into emerging opportunities in generative AI and enterprise solutions.

(Except for the headline, this article has not been edited by FPJ's editorial team and is auto-generated from an agency feed.)