New Delhi, Jan 5: The Indian IT industry’s revenue growth is expected to recover to 4–5 per cent in FY27, leading to high-single-digit earnings per share (EPS) growth, according to a report by HSBC Global
Investment Research.
IT stocks likely to move in line with broader market
The report noted that IT stocks, which are already up about 15 per cent from their recent lows, are likely to perform broadly in line with the overall market in 2026.
“We still see an improving outlook, but now expect the IT sector to perform in line with the broader market in FY27. IT is no longer a long-term double-digit compounding sector, with the long-term stock return trajectory gradient lower than in the past,” the research firm said.
Sector becoming more cyclical
HSBC forecast that IT stocks are likely to become “much more cyclical,” requiring active management of top-tier companies across cycles and volatility. However, it added that a potential cyclical rebound in CY26 or FY27 could provide additional upside beyond recent gains.
The report highlighted that the third quarter of FY26 was affected by weak seasonality and is unlikely to deliver positive surprises, with company-level performance signals remaining mixed.
Growth expectations recalibrated
“We had expected IT to perform better than the market in 2026. This view was led by a likely improvement in growth, less demanding valuations, a favourable base after three years of anaemic growth, and moderation in the sector’s AI overhang,” said Yogesh Aggarwal, Head of Research, HSBC India.
He added that IT stocks gained around 15–20 per cent between October and December 2025, compared with a 6 per cent return on the Nifty, indicating that a significant portion of expected improvement in fundamentals for CY26 or FY27 has already been priced in.
Improving client confidence and AI visibility
The report cited commentary from IT industry customers indicating improved confidence in the business outlook and a higher willingness to spend on technology. It also pointed to better visibility on the deflationary impact of artificial intelligence on IT services, with monetisation of AI through business-accretive deals appearing closer.
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Medium-term outlook remains constructive
Separately, Motilal Oswal Financial Services said in its latest report that it remains constructive on IT services from a medium-term perspective, citing expectations of a gradual recovery in global technology spending amid stabilising macroeconomic conditions and increased focus on digital transformation, AI and efficiency-led adoption.
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