Key Points

Increased macro concerns are expected to limit incremental tech spending, but demand trends are stable, and increasing deal conversions as well as currency tailwinds may support growth, the report from broking firm Equirus Securities said.

Analysts forecast that consolidated constant-currency US dollar sales for the top six large-cap companies will increase by 0 to 2.1 per cent quarter-on-quarter.

"We expect the top 6 large IT companies to report sales growth of 0 per cent to 2.1 per cent QoQ in 2Q," the broking firm said. In midcaps, the firm forecasted healthy sales growth in four companies.

Considering tailwinds from currency benefits (INR/USD depreciated by 3 per cent in Q2 on average for most companies) and benign supply-side issues, cost optimisation and productivity-led gains, the broking firm expects good execution on EBITM to continue in the second quarter for large-cap companies.

The sector valuations will remain under check and range-bound at least in the near-medium term, considering the volatile macro environment due to increasing geopolitical issues and tariff-related uncertainty, the report said.

Further, any higher demand from clients to pass on AI-led productivity gains and rising investor caution related to any further changes in visa-related rulings from the USA will also act as tailwinds, according to the broking firm.

"However, we also believe that clients may not materially postpone their investment in adopting GenAI or Agentic AI, for which they may drive further savings by awarding cost-takeout deals to invest in AI-led transformation," the report said.

HSBC Global Investment Research earlier this month said that sustainable growth of India's IT services sector is likely to be within 4 to 5 per cent, above the trendline of the past three years.

Analysts assumed less macro volatility in the coming quarters and expected some recovery in growth in FY27.

- IANS