Nomura’s perspective on the Indian IT Sector can be summarized as follows:
Nomura’s outlook for the fiscal year 2024 suggests a subdued growth rate of 2-5% on a constant currency (cc) basis. This figure pales in comparison to the 8-11% growth achieved in the preceding fiscal year, FY23. This lower growth projection signals weak demand, which remains below the levels observed before the onset of the Covid-19 pandemic.
The prospects for a substantial recovery in discretionary demand within the Indian IT industry appear dim, not only for the second half of FY24 but also potentially extending into FY25.
In light of these concerns, Nomura maintains a cautious stance on the sector.
While growth in large-cap Indian IT companies is expected to see an improvement in FY25 compared to FY24, this upturn is anticipated to be driven primarily by cost-saving deals.
Nomura anticipates significant variations in operating performance across different companies within the sector during the FY24-25 period.
Nomura’s top picks within the Indian IT sector are Tech Mahindra in the large-cap category, and Coforge and Birlasoft in the mid-cap category. However, they recommend reducing exposure to TCS.
To provide context, on the most recent Friday, the NIFTY IT Index concluded the trading session at 31,784.40, reflecting a marginal decline of 0.30%.