The BSE Infotech index has gained 15.9% during the period, the third highest following 20.9% return in the BSE Healthcare and 16.6% increase in the BSE FMCG indices. In addition, barring Wipro, which gained 6.5%, other top IT stocks including TCS, Infosys, HCL Technologies, Tech Mahindra, and LTIMindtree have earned double-digit returns during the period.
The upward revision in the full- year revenue and operating margin guidance by Accenture, the NYSE-listed larger global peer of Indian IT exporters, last week has made analysts more optimistic about a turnaround in the growth prospects of the sector.
While declaring inline numbers for the fourth quarter ended August 2024, Accenture raised the FY25 revenue growth guidance to 3-6% in constant currency from the earlier expectation of 1.5-2.5% growth, citing improving economic conditions and increased client engagements. It also upgraded the operating margin guidance to 15.6-15.8% from the earlier estimate of 14.8% for the full year.
Similar to the strong trend in new deal wins shown by Indian IT exporters over the past few quarters, Accenture reported $20.1 billion in new bookings for the fourth quarter. The order bookings for the full-year increased by 13% to a record $81.2 billion.
“We believe the guidance, deal bookings, and the overall commentary have turned the corner, which bodes well for the sector,” said Motilal Oswal Financial Services in a report. The brokerage added that the client spend behaviour is changing for the better which may result in the return of modernisations and discretionary projects.Axis Securities noted in a report that Accenture’s overall fourth quarter bookings were resilient, indicating robust demand despite prevailing uncertainties.“The company has robust client relationships, which is reflected in the top 30 clients with quarterly bookings of around $100 million,” the brokerage mentioned.
While the near-term challenges are expected to keep the performance of Indian IT exporters muted for the September quarter, the scenario is expected to change in the new year as clients negotiate IT budgets.
“We are not too concerned about variance in revenue growth for Indian IT services companies in the upcoming quarter and believe it should not lead to a meaningful change in estimates, sentiments, or valuations excluding short-term gyrations,” said Motilal Oswal in the report. It added that when client budgets for 2025 would be finalised, the magnitude of change in client behaviour would become clearer.