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India’s IT services sector is likely to see modest growth at the top end, while mid-sized companies could deliver faster expansion, according to market
expert Pankaj Tibrewal in an exclusive conversation with ET Now, who pointed to agility, client wins and AI-led implementation as key differentiators. “I think from an IT services perspective, few results which have come out clearly show that growth momentum is okayish, not too bad, not too great, and margins, I think they have been holding on well,” Tibrewal said. He added that order wins have been “quite decent” for some of the larger companies, but the broader outlook remains subdued. “Longer-term outlook and if you take a medium-term outlook also, it would be a single-digit growth for most of the large IT companies,” he said, estimating growth of “maybe between 5 to 8 per cent depending on the names.”
Midcap IT seen delivering faster expansion
In contrast, Tibrewal expects several midcap IT companies to grow at a faster pace. “There are many midcap companies which can grow in double digits because their base is low, they are having strong client wins, they are implementing AI in many areas along with their clients, and they are able to be more agile and nimble in their workforce,” he said.While valuations in the midcap IT space remain elevated, Tibrewal said growth could justify them over time. “If you look at this space over the last every 10 years, there are some new winners which are discovered,” he said, citing companies such as Persistent Systems and Coforge that delivered sustained growth over multiple quarters.
Large IT firms may struggle to pivot fully to AI
On the ability of Indian IT services firms to reposition themselves as AI-led technology players, Tibrewal expressed some disappointment. “My only disappointment with Indian IT has been that over the last decade, when you had a lot of cash flows, you largely distributed it through buybacks or dividends, but very few companies reinvested those back into new-generation disruption,” he said.He added that a sharp transformation by large IT services firms may be difficult. “I don’t see services companies pivoting themselves very significantly over a period of time,” Tibrewal said, though he expects few new IT companies which will be discovered over a period of time which will have a more AI play.
Capital market platforms show structural strength
Beyond IT, Tibrewal highlighted strong performance in non-lending capital market businesses. “Over the last five years, one segment which has got discovered is this non-lending capital marketplace across AMCs, depository, exchanges, distribution platforms,” he said, noting that several players reported strong numbers even without significant mark-to-market gains.Positive bias on private sector banks
On banking, Tibrewal said he currently holds a positive view on private sector lenders. “We believe that the NIM contraction which we saw over the last few quarters is behind us,” he said, adding that recent results showed net interest margin expansion despite loan repricing. “In FY27, we believe that private sector banking would be a 20 per cent growth story.”Commodities seen supported by long-term supply constraints
Tibrewal also reiterated a constructive outlook on commodities, particularly metals. “We are positive on hard assets for a long time, and we believe that this is a very structural change which is happening globally,” he said. Highlighting copper as an example, he said global demand over the next 18 years could equal what was mined over the past 10,000 years, while new supply remains constrained by long project timelines.On broader market performance, Tibrewal said indices have remained flat even as many stocks corrected sharply. “If you look at from June-July 2024, actually small and midcaps are negative,” he said, describing the phase as both a price and time correction.
Earnings growth, foreign flows key to market revival
Looking ahead, Tibrewal said earnings growth could be the key trigger. “Next year our belief is that the earnings growth from a Nifty perspective will move into double digits,” he said, led by banking, auto and power sectors. He added that easing foreign investor selling could also improve sentiment if earnings momentum sustains.(Disclaimer: The above article is meant for informational purposes only, and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money-related decisions.)
