According to Goldman Sachs, the pent-up demand for IT services and the effects of using generative artificial intelligence (AI) technology are driving revenue growth for Indian IT industry enterprises.
Even while near-term revenue is anticipated to remain “muted,” the Wall Street bank predicted a 9%–10% revenue growth starting in 2025, claiming that the market may be underestimating the sector’s potential growth.
In a report dated Tuesday, Goldman Sachs analysts under the direction of Manish Adukia stated that “Indian IT services companies have doubled their market share in the last 10 years.”
Given the structural advantages of a sizable, inexpensive workforce and a varied geographic presence, we anticipate Indian IT firms to keep expanding their market share.
Additionally, they mention historical data that indicates periods of economic sluggishness have been followed by heightened growth for Indian IT services companies, driven by rising enterprise outsourcing and pent-up demand.
In an effort to partially make up for a 26% decline last year, India’s Nifty IT index (.NIFTYIT) is up nearly 8% this year. The Nifty 50 index (.NSEI), a larger benchmark, has increased 7.2% so far in 2023.
Over the course of fiscal 2025–2026, operating profit growth for the industry is anticipated to increase at a rate of 12%–15%, outpacing sales growth, as the brokerage expects margins for all the companies it covers to widen.
With “buy” recommendations on prestigious companies like Infosys (INFY.NS) and TCS (TCS.NS) as well as the smaller LTIMindtree (LTIM.NS), it started coverage on six Indian IT equities. It did this by citing robust revenue growth projections.
It is more pessimistic and advises a “sell” on a lower margin profile for Tech Mahindra (TEML.NS) and Wipro (WIPR.NS).
HCL Tech (HCLT.NS) received a “neutral” rating from Goldman Sachs as well due to potential threats to near-term revenue growth. In the medium run, it considered the company to be “well-placed,” nonetheless.
