Market analysts expect a subdued Q4 performance across the board
Indian IT sector will kick off its fourth-quarter earnings season with Tata Consultancy Services (TCS) set to announce its Q4 and full-year performance. (File image)
Mumbai: The Indian IT sector will kick off its fourth-quarter earnings season on Thursday, April 10, with Tata Consultancy Services (TCS) set to announce its Q4 and full-year performance. The results come against a backdrop of mounting concerns over a potential recession in the United States—the largest market for Indian IT services.
Despite the grim macroeconomic outlook, a weaker Indian rupee against the US dollar and other foreign currencies may provide a slight boost to earnings, particularly for export-heavy sectors like IT.
Market analysts expect a subdued Q4 performance across the board. Large-cap IT firms are projected to report flat to a 1% revenue decline in constant currency terms, while mid-cap companies may outperform with relatively stronger growth.
“There is a noticeable tone of caution in the guidance being prepared for FY26,” noted a recent earnings preview. Reflecting market apprehension, the BSE IT index closed 2.01% lower on Wednesday amid ongoing global tensions, including the escalating tariff standoff between the US and China.
The Nifty IT Index has already plunged 23% year-to-date as investors brace for the fallout of a possible US economic downturn. “Our analysis of the last four macroeconomic slowdowns since 1992 suggests that Indian IT Services revenue growth could remain flat in FY26,” said Kumar Rakesh, IT analyst at BNP Paribas India.
Rakesh added that while stocks like TCS, Infosys, and LTI Mindtree may have already priced in much of the downside risk, companies such as Tech Mahindra, Wipro, and HCL Technologies could still face valuation pressures. "The Indian IT services sector is currently trading at its highest dividend yield in a decade, excluding the Covid period," he noted.
Rakesh also flagged geopolitical developments as key risks: “Any reversal or delay in proposed tariffs could serve as an upside catalyst for growth-oriented stocks like Persistent Systems and Infosys. However, prolonged tariff pressures could further weigh on sector performance.”
Meanwhile, rating agency Crisil highlighted the impact of currency fluctuations on export-oriented sectors. “A depreciating rupee could boost earnings for IT, home textiles, and marine foods,” Crisil stated. The rupee, which had weakened from ₹83.81 per US dollar on October 1, 2024, to ₹87.40 by February 28, 2025, recently appreciated to ₹85.65 as of April 3.
As investors await the Q4 numbers, market sentiment remains cautious, with external economic indicators likely to play a decisive role in shaping the sector's near-term outlook.
Despite the grim macroeconomic outlook, a weaker Indian rupee against the US dollar and other foreign currencies may provide a slight boost to earnings, particularly for export-heavy sectors like IT.
Market analysts expect a subdued Q4 performance across the board. Large-cap IT firms are projected to report flat to a 1% revenue decline in constant currency terms, while mid-cap companies may outperform with relatively stronger growth.
“There is a noticeable tone of caution in the guidance being prepared for FY26,” noted a recent earnings preview. Reflecting market apprehension, the BSE IT index closed 2.01% lower on Wednesday amid ongoing global tensions, including the escalating tariff standoff between the US and China.
The Nifty IT Index has already plunged 23% year-to-date as investors brace for the fallout of a possible US economic downturn. “Our analysis of the last four macroeconomic slowdowns since 1992 suggests that Indian IT Services revenue growth could remain flat in FY26,” said Kumar Rakesh, IT analyst at BNP Paribas India.
Rakesh added that while stocks like TCS, Infosys, and LTI Mindtree may have already priced in much of the downside risk, companies such as Tech Mahindra, Wipro, and HCL Technologies could still face valuation pressures. "The Indian IT services sector is currently trading at its highest dividend yield in a decade, excluding the Covid period," he noted.
Rakesh also flagged geopolitical developments as key risks: “Any reversal or delay in proposed tariffs could serve as an upside catalyst for growth-oriented stocks like Persistent Systems and Infosys. However, prolonged tariff pressures could further weigh on sector performance.”
Meanwhile, rating agency Crisil highlighted the impact of currency fluctuations on export-oriented sectors. “A depreciating rupee could boost earnings for IT, home textiles, and marine foods,” Crisil stated. The rupee, which had weakened from ₹83.81 per US dollar on October 1, 2024, to ₹87.40 by February 28, 2025, recently appreciated to ₹85.65 as of April 3.
As investors await the Q4 numbers, market sentiment remains cautious, with external economic indicators likely to play a decisive role in shaping the sector's near-term outlook.
( Source : Deccan Chronicle )
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