According to a new report by Choice Broking, the results of India’s IT companies in the fourth quarter of FY 2025 may be a bit weak. The reason for this is that clients from the US and Europe are reviewing their expenses and decreasing non-discretionary IT expenses. This may reduce the growth of IT and engineering services companies by 2-3% in the next financial year (FY26).
Tariff does not have a direct effect in America, but pressure will remain
Although American tariffs do not apply directly to IT services, this may affect the industries that are big customers of Indian IT companies. If there is a recession in the US or the trade war is sharp, it may shock Indian software exporters.
Base Case vs. Beer Case: Preparation for two possibilities
The report describes two types of situation (Scenario):
- Base Case: Light recession, dollar stability and large deals continue in the US. In this situation, India and other countries may get a chance to compromise on better terms than the US.
- Beer Case: A deep recession in the US and the possibility of tariff on Indian IT services. In this situation, growth can be negative and the dollar can go below ₹ 85, which will have a major impact on the income of the companies.
If the possibility of “beer case” increases, brokerage can ‘cautout’ its sector rating.
Tier-I companies slow, Tier-II a little relief
Choice Broking reported that the income of Tier -I companies can range from -0.1% to 1.5% in this quarter. At the same time, the growth of Tier-II companies is estimated from 0% to 4.5%. Companies like Infosys, HCL Tech and Ltimindtree may have to face more impact of US policy due to excess exposure in retail, manufacturing and logistics sector.
Operational improvement, but hiring may slow down
In IT companies, the rate of leave is now reduced, which has improved the work. However, Hiring of new people may remain slow at the moment. Companies are now focusing on reducing sub-contracting costs, creating the right balance of workforce and increasing operational efficiency.
Freaked valuation, better chance for long term
The situation may be a little challenging, but the decline in IT stocks in the stock market can now become a good opportunity for long -term investors. The report described Infosys, HCL Tech and Ltimindtree in Tier-I companies and Coforge and L&T Technology Services are described as a favorite in Tier-II.
| Company name | CMP (₹) | Target price (₹) | Potential return | Rating |
|---|---|---|---|---|
| Allied digital (alds) | 181 | 264 | 46% | Buy |
| Coforge (Coforge) | 6,465 | 11,260 | 74% | Buy |
| Cyient (CIL) | 1,153 | 1,660 | 44% | Buy |
| Datamatics Global (data) | 569 | 610 | 7% | Hold |
| Happiest Minds (Happstmn) | 549 | 750 | 37% | Buy |
| HCL Tech (HCLT) | 1,403 | 1,807 | 29% | Buy |
| Indimart intermesh | 1,996 | 2,286 | 15% | Hold |
| Infosys (info) | 1,429 | 1,850 | 29% | Buy |
| Kpit tech. (Kpit) | 1,114 | 1,707 | 53% | Buy |
| L&T Tech. (LTTS) | 4,102 | 5,525 | 35% | Buy |
| LTI Mindtree (LTIM) | 4,173 | 5,445 | 30% | Buy |
| Mphasis (mphl) | 2,170 | 2,625 | 21% | Buy |
| Persistent Systems (PSYS) | 4,594 | 5,660 | 23% | Hold |
| Tata Consultancy (TCS) | 3,293 | 4,236 | 29% | Buy |
| Tata Elxsi (TELX) | 4,872 | 4,900 | 0.5% | Hold |
| Tech mahindra (techm) | 1,315 | 1,865 | 42% | Buy |
| Wipro (WPRO) | 247 | 296 | 20% | Hold |
Disclaimer: This article is only for information. Before investment, consult yourself or financial advisor.
First Published – April 9, 2025 | 8:33 pm IST
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