New Delhi, October 2 (IANS). Despite global geopolitical tensions, economic uncertainties and rising concerns over the impact of Generative Artificial Intelligence (Gen-AI), mid-sized IT companies are likely to outperform their larger rivals in the second quarter of FY 2026-27. This has come to light in a new report by brokerage firm Nuvama.
According to the report, the overall demand environment for IT services remained broadly stable during the second quarter. However, the worsening global geopolitical situation in September has had some impact on business sentiments.
Nuvama believes that during the upcoming quarterly results, the management of IT companies will take a cautious approach regarding global tensions, weak macroeconomic environment and the changing impact of Gen-AI. These factors have weighed on investor sentiment in recent months.
According to the report, the IT index has declined by about 26 percent in the last nine months. Possible disruption from platform-based Gen-AI and uncertainties related to the Gulf region are considered to be the main reasons behind this.
However, despite these challenges, Nuvama has maintained a positive outlook towards the IT services sector. The report says that Gen-AI is not a threat to the existing business models of IT companies, but is more likely to create new opportunities.
“We continue to believe that the IT services model will remain strong going forward and the impact of Gen-AI will open up huge opportunities for the industry,” the brokerage said.
The report also estimates that margins of most IT companies may see improvement. Companies are expected to benefit from increased operational efficiency and cost control measures.
While some companies may revise their revenue growth estimates, Nuvama believes major changes in margin guidance are unlikely.
The brokerage has also revised its estimate regarding the dollar-rupee exchange rate from Rs 93 per dollar to Rs 95 per dollar. Also, the average price-to-earnings (P/E) multiples of FY 2028 to FY 2029 have been made the basis for evaluation.
The report said volatility may persist in the near term, but prospects for the IT services sector appear strong in the medium and long term. Steady demand, increasing investment in digital transformation projects and AI-based solutions could create new growth opportunities for the industry in the coming years.
–IANS
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