Sluggishness in BFSI sector may continue: Experts

Macro-economic headwinds and decline in IT spending in banks have hit the BFSI sector hard. The sluggishness might continue in the coming quarters as well, say experts.

BFSI is the largest business vertical for IT majors and accounts for over 30 percent of the total revenue for all the three firms driving. While TCS and Wipro’s revenues from the segment grew by 2 percent, Infosys degrew sequentially for the quarter ended March 31, 2019.

Talking about de-growth in the traditionally strong segment, Pravin Rao, COO, Infosys, said, “This quarter you saw a negative growth in financial services. If you look at banking alone we had a positive growth, but on the insurance sector we had a negative growth and it brought the overall growth down.”

Rao further added that the company saw huge deal wins in the sector and confident about the performance in FY20.

Though the companies are confident of the segment growth in the coming quarters, macroeconomic headwinds and reduction in budget could impact growth.

Roger Park, partner, America's Advisory, at consulting firm EY, told The Economic Times last month that banks and financial institutions are reducing budgets for traditional services.

According to him, this is why TCS and Infosys have seen sluggish growth in the financial services sector while Wipro has done better, which is in the digital transformation projects of banks.

Abidali Neemuchwala, CEO, Wipro, said that though the company has seen good success in financial services, the company will be watchful of the macro environment. "Especially in some parts of BFSI where we see some softness in capital markets and in Europe," he added.

According to an analyst, who did not want to be named, the question to ask is if the good deal pipeline will be enough to guarantee solid growth.