The Indian information technology sector is poised for a period of measured performance as it heads into the announcement of its December quarter results. This seasonally weak period, marked by a higher number of holidays and furloughs, is expected to keep growth in check. Industry analysts point to a continued focus on cost-optimization by global clients, with a full-scale revival in discretionary spending still on the horizon.
Midcap Firms Set the Pace for Growth
Brokerage insights suggest a clear trend: mid-sized IT companies are likely to outshine their larger counterparts this quarter. According to Elara Capital, firms like Coforge and Persistent Systems are projected to post a strong sequential dollar revenue growth of approximately 3%. They are expected to be followed by LTIMindtree and Mphasis, which are estimated to see growth in the range of 1% to 2%.
Motilal Oswal reinforces this outlook, estimating that midcaps could display a growth range spanning from -2.5% to 3.5%. This indicates that while some may face challenges, the segment's leaders are positioned for solid quarter-on-quarter expansion.
Segment-Wise Performance and Large Cap Outlook
Drilling down into company-specific forecasts, Mphasis is anticipated to report about 1% growth, led by its media & telecom and insurance verticals. However, its banking, financial services, and insurance (BFSI) segment may feel the pinch from furloughs. Similarly, LTIMindtree might report around 2% growth, driven by manufacturing and retail, even as its BFSI business faces seasonal headwinds.
Among the industry giants, the performance is predicted to be tepid. Kotak Equities notes that seasonal trends should drive a strong performance at HCLTech (2.8%) but a weak showing at Infosys (0.3% sequential decline). The organic revenue growth for other majors like TCS, Wipro, and Tech Mahindra is expected to be confined to a narrow band of 0.3% to 0.9%.
Stable Demand Amid Cautious Client Spending
The overarching theme for the quarter remains one of caution. Demand in the sector has stayed subdued, with only a limited rebound in discretionary project spending. Clients continue to prioritize optimizing their existing technology costs over committing to new, large-scale transformation projects. This cautious stance is expected to keep enterprise technology spending broadly stable in the near term, with a significant loosening of budgets not anticipated immediately.
In summary, the third quarter of the fiscal year is shaping up to be a story of resilience rather than rapid growth for Indian IT. While furloughs and a conservative client approach will dampen overall numbers, the emerging strength in the midcap segment offers a notable bright spot in the sector's evolving narrative.
