resr 5paisa Research Team 27th December 2022

Why Indian IT stocks may come under more pressure in coming months

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The Indian tech sector could be facing the heat going forward. Amid macroeconomic pressures, information technology companies have lowered their growth and revenue projections for the current financial year (FY23). 

HCL Technologies has set its revenue guidance growth of 16-17 per cent for the year FY23, The Times of India (TOI) said in a report. 

Apart from HCL, Accenture, too said that the clients were pausing smaller deals and there was a delay in overall decision-making.

What exactly has Accenture said?

"All of this (macro challenges) impacts the smaller deals more than the bigger deals because we're continuing to see that big transformation focus," Accenture said while announcing its financial results for the quarter ending November.

How do Accenture’s numbers look?

Accenture's consulting revenue growth moderated to 10 per cent in the last quarter against 22-32 per cent in the previous four quarters.

And what has HCL said?

HCL, according to TOI, was also facing troubles in cracking big deals.

HCL's CEO C Vijaykumar recently said that the spending on hi-tech and telecom verticals was lower than expected and with price changes, it is going to be a big macroeconomic challenge.

What do analysts have to say about this emerging situation?

"There are some large 'consolidated deals' out in the market as firms look to bring more services under one provider to drive down costs and beat inflationary pressure. I expect to see some large deal announcements in Q1FY23," Phil Fersht, CEO and chief analyst at HFS Research told TOI.

On the IT sector, analysts expect margins for IT to remain range-bound in FY23. The analysts say that IT stocks have fallen in recent months and should be accumulated when the US macroeconomic scenario is at its maximum pain. The analysts say that next six to nine months will give investors a good opportunity to accumulate preferred IT stocks.

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