Analysts predict muted growth for Indian IT companies as US spending struggles and global tensions continue to affect the industry.
India’s information technology sector, one of the worst performers this year, is unlikely to see a significant rebound in fiscal 2026, according to analysts, following a warning from Accenture about weak demand and constrained discretionary spending.
Accenture, a global leader in IT services and a key indicator for the Indian IT market, reported on Thursday that spending on discretionary projects remained limited, with no substantial increase in client budgets. The company also highlighted concerns over the impact of rising global trade tensions, particularly due to new US tariffs, which have raised fears of an economic slowdown in the United States – a crucial market for Indian IT firms.
Amit Chandra, Deputy Vice President at HDFC Securities, commented that the recent uncertainty in the market has cast a shadow over the first half of fiscal 2026, creating concerns about the potential recovery of the Indian IT industry in the upcoming fiscal year.
India’s IT index has dropped by 15.3% this year, marking its worst quarter since June 2022. Major companies such as TCS, Wipro, Infosys, and HCLTech have experienced declines ranging from 11.2% to 18.1%.
Analysts from Kotak Institutional Equities have pointed out that the recovery in demand remains sluggish, and weak performance in securing large deals in fiscal 2025 will likely result in lower revenue from these deals in fiscal 2026. Additionally, early-stage adoption of generative AI could pose challenges for the sector.
Citi Research has forecasted a modest 4% revenue growth for IT companies in fiscal 2026, similar to the growth expected in fiscal 2025. Meanwhile, Morgan Stanley has warned that subdued client spending could affect growth prospects.
Despite signs of recovery in sectors like banking, financial services, insurance (BFSI), and healthcare, Chandra noted that the uncertainty of the past two months has led clients across various sectors to adopt a cautious approach, potentially curtailing their spending.
Accenture also reported delays and cancellations of new contracts in the US, which could further affect Indian IT companies, although analysts from Citi stated that while Indian firms have limited exposure to these disruptions, it could heighten competition in other areas of the market.
