India IT Sector To Grow 4-5% Despite Global Challenges: HSBC

India’s IT sector may see a growth in the range of 4-5 per cent in the long run, above the trendline of the past three years, according to a report of HSBC Global Investment Research.

Analysts assumed less macro volatility in the coming quarters and expected some recovery in growth in FY27, the report from HSBC Global Investment Research said.

The IT services sector is expected to remain sluggish in Q2 FY26, as demand continues to be muted amid macroeconomic uncertainties and the deflationary effects of artificial intelligence. According to HSBC, these conditions are unlikely to improve until FY27, with global headwinds continuing to exert pressure on pricing. Despite this, the firm maintained a ‘buy’ rating on several IT stocks.

Vendor consolidation

and cost-rationalization deals will keep the growth in line with the first quarter in the second quarter, which HSBC termed as “zero-sum game”.

While US corporate earnings remain relatively strong, companies are still cautious in launching discretionary new initiatives, the research firm observed.

Looking ahead, large-cap IT companies are expected to post sequential dollar growth of 0–2 per cent, whereas mid-tier firms may see growth ranging from a 1 per cent decline to 5.5 per cent. HSBC emphasized that large-cap IT stocks can no longer be viewed as reliable five-year buy-and-hold investments, recommending active management to navigate their cyclical volatility.

IT sector is facing regular troubles due to US tariffs, H-1B visa turmoil and slower demand.

(With IANS Inputs)