The Nifty IT index rose 2 percent after the Nasdaq-listed IT services provider Accenture increased the annual revenue growth forecast to 3-6 percent for 2025, on the back of improvement in the macroeconomic environment and US Fed's recent interest rate cut. Accenture is widely considered as a benchmark for Indian IT companies, offering insights into their likely performance.
Accenture's latest (Q4) earnings have set the tone for India's IT sector, with Nuvama, Nomura, and Morgan Stanley offering their outlook. While growth in Generative AI and project wins fuel optimism, challenges remain.
Today, all 10 constituents of the Nifty IT index were up 1-3 percent. IT stocks led the charge on the Nifty 50 list as well, with LTIMindtree, Infosys, and Wipro advancing over 2 percent each.
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Nuvama sees positive implications for Indian IT services, especially with the recovery in Consulting. "Improvement in Consulting is particularly positive for Indian IT Services as it signals recovery in discretionary spends," the report said. Nuvama was optimistic about the IT sector's prospects and forecast healthy earnings growth over the next three years.
Nomura maintained a positive outlook for large-cap Indian IT companies, issuing 'Buy' calls on Infosys, Wipro, and Cognizant Technology. The brokerage also sees potential in mid-cap firms like eClerx Services.
Accenture's order bookings remained robust, fueled by large projects and the growing maturity of Generative AI. While Nomura predicts that growth will likely bottom out in FY25, the brokerage had a 'Reduce' recommendation on companies like LTIMindtree, Mphasis, and L&T Technology Services.
Also Read | Accenture increases revenue forecast for FY25 on macro tailwinds
Morgan Stanley offered a slightly more tempered outlook. Although Accenture's FY25 guidance suggests organic growth improvement over the next 12 months, the brokerage doesn't foresee any material shifts in the macroeconomic environment just yet.
Morgan Stanley views Accenture's results as neutral to slightly positive for Indian IT stocks. The brokerage said that Accenture's growth in Q4, although modest, is encouraging and offers a glimmer of relief for the Indian IT sector. The brokerage firm expects India's IT industry to see a broad-based improvement in growth.
Accenture's results offered a sense of cautious optimism for the Indian IT industry. While growth may not surge immediately, the long-term outlook, especially with the evolving Generative AI landscape, is expected to boost the sector's performance.
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