Tech stocks are making a notable recovery following a sharp decline at the start of trading. The Nifty IT Index has turned positive, with major players like Infosys, TCS, and Wipro bouncing back from earlier lows. While concerns arise from Accenture trimming its guidance and highlighting cuts in government IT spending in the U.S., the overall impact on Indian tech firms appears to be manageable.

Accenture’s results often act as a predictor for the broader IT landscape, especially with the Indian earnings season set to kick off in April. Investors are keen to see how domestic companies navigate potential challenges. On a positive note, Accenture has raised the lower end of its 2025 revenue growth forecast to 5-7%, up from a previous estimate of 4-7%. This adjustment suggests steady demand for IT services, albeit with lingering macroeconomic challenges.

Nifty IT Index Shows Resilience

The Nifty IT Index, after opening nearly 2% lower, has managed to recover, edging up 0.2% into positive territory. MphasiS led the gainers with a 3.5% increase, followed closely by Coforge at 2%. Other tech giants, including HCL Tech, Tech Mahindra, and LTIMindtree, also reflected positive trends. However, Infosys and Wipro remained in the red, dropping 1.5% and 0.6%, respectively.

• The index has rebounded by 3% from its intraday lows, showcasing resilience amid market fluctuations.

Implications of Accenture’s Guidance on Indian IT Firms

Unlike Accenture, Indian IT companies do not directly engage with U.S. federal government contracts. However, the prevailing macroeconomic uncertainty could still dampen client spending, particularly in sectors like banking and capital markets.

In addition, Indian IT firms are banking on the ongoing artificial intelligence (AI) boom, although the transformation is gradual. Accenture reported that its generative AI bookings reached $2.6 billion in the first half of FY25, nearing last year’s total of $3 billion.

Analyst Predictions for Tech Stocks

Insights from Nuvama

Brokerage firm Nuvama provided insights stating that “Accenture has upgraded its FY25 revenue growth guidance to 5-7% from 4-7% year-over-year (constant currency), with inorganic growth contributing over 3%.” They noted an increase in uncertainty, particularly in public services due to government spending reviews.

• Accenture’s workforce grew by approximately 2,000 employees, with its data and AI team now comprising 72,000 members, close to its FY25 target of 80,000.
• The firm has also invested over $500 million across 11 acquisitions in the first half of FY25, aiming for total investments of $2-3 billion this year.

Nomura’s Perspective on Indian IT Stocks

Nomura, another brokerage firm, echoed similar sentiments regarding Indian IT stocks. They emphasized that while Indian firms lack exposure to U.S. federal contracts, the potential for cautious client spending due to macroeconomic uncertainties is a real concern.

• Recovery in discretionary demand may take several quarters, but a significant downturn is unlikely unless there’s a severe economic crisis.
• Nomura recommends Infosys and Cognizant in the large-cap space and favors Coforge among mid-cap stocks.

As the tech sector navigates these challenges, all eyes will be on how Indian IT companies perform in the upcoming earnings season, particularly in the face of evolving market dynamics and client behaviors.