After the release of strong quarterly results by global IT giant Accenture, analysts are optimistic that Indian IT companies may also post strong numbers in the upcoming quarters, following the global trend.
A report by HDFC Securities suggests that Accenture's performance signals a potential recovery for the IT sector as a whole, offering positive insights for Indian firms.
Accenture's Q4FY24 results validated signs of improvement for the IT sector, said the report.
The company's Q4 FY24 results have highlighted significant improvements in the IT industry. As per the report, the company's top-end guidance has factored in stable macroeconomic conditions, with a notable 4 percentage point swing in organic growth--from a negative 1 per cent in FY24 to a projected positive 3 per cent for FY25.This shift suggests that the global IT landscape is beginning to show signs of recovery, driven by demand for outsourcing and large deals.
The report noted that this trend is likely to benefit Indian IT companies, which have a significant focus on outsourcing and large-scale deals. Accenture's strong performance in outsourcing, particularly through large contracts, is seen as a positive indicator for Indian IT firms that are also heavily reliant on this segment for growth."
The continuity of strong growth in outsourcing driven by large deals can be construed as a positive indicator for Indian IT" added the report.
The recovery in outsourcing demand is expected to help Indian IT companies improve their performance in the coming quarters.
However, the report also noted that the growth may not be entirely uniform across the Indian IT sector. It mentioned that the Accenture's growth has been heavily supported by public services deals, which might not be as relevant to Indian IT companies that typically have a smaller share in this sector.
"The uptick may not be completely secular due to the high share of public services deals by the company" the report noted.
Despite this, the positive trends in other verticals such as Communications, Media, and Technology (CMT), and a slight recovery in the Banking, Financial Services, and Insurance (BFSI) sector, are encouraging for Indian IT firms.
Overall, while the recovery in global IT markets bodes well for Indian companies, the extent of their growth will depend on how well they can capitalize on these trends and navigate challenges in specific sectors.