New Delhi, Jan 5 (IANS) The Indian IT industry's revenue growth is expected to recover to 4-5 per cent in FY27, leading to high‑single‑digit EPS growth, a report said on Monday.

The report from HSBC Global Investment Research, however, said that IT stocks, up about 15 per cent from their lows, could still perform broadly in line with the market in 2026.

"We still see an improving outlook, but now expect the IT sector to perform in line with the broader market in FY27. IT is no longer a long-term double-digit compounding sector, with the long-term stock return trajectory gradient lower than in the past," the research firm said.

The report forecasted IT stocks to be a "lot more cyclical, requiring active management" of top‑tier ones around their cycles and volatility. It added that a possible cyclical rebound in CY26 or FY27 could give IT stocks further upside on top of recent performance.

The report highlighted that 3QFY26 was impacted by weak seasons and unlikely to surprise positively, noting mixed company‑level signals.

“We had expected IT to perform better than the market in 2026. This view was led by a likely improvement in growth, less demanding valuations, a favourable base after three years of anaemic growth, and moderation in the sector AI overhang,” said Yogesh Aggarwal, Head of Research, HSBC India.

IT stocks were up around 15-20 per cent between October-December 2025 compared with a 6 per cent return on Nifty and hence factor in a decent chunk of the expected improvement in fundamentals in CY2026 or FY27, he added.

The report cited commentary from IT industry customers which signalled improved confidence in the business outlook and, hence, a higher propensity to spend on IT.

Further, it noted visibility on the deflationary impact of AI on IT services, while monetisation of AI for business-accretive deals is also closer.

Motilal Oswal Financial Services, in its latest report, said it is "constructive on IT services from a medium-term perspective, as global technology spending is expected to recover gradually with stabilising macro conditions and increased focus on digital transformation, AI and efficiency-led adoption.”

--IANS

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