Goldman Sachs sees revenue growth for India’s IT sector companies picking up, driven by pent-up demand for IT services and the impact of adopting generative artificial intelligence (AI) tech. The Wall Street Bank forecast a 9 per cent -10 per cent revenue growth from 2025, saying the market could be under-appreciating the sector’s upside, even though near-term revenue is likely to remain “muted”. “Indian IT services companies have doubled their market share in the last 10 years,” analysts at Goldman Sachs led by Manish Adukia wrote in a note dated Tuesday. “Given the structural advantages of a large, skilled and low-cost workforce, coupled with a diversified geographical footprint, we expect Indian IT firms to continue gaining share.”

They also note that historical data suggests periods of economic slowdown have been followed by elevated growth for Indian IT services companies, driven by increased enterprise outsourcing and pent-up demand. India’s Nifty IT index is up about 8 per cent this year, looking to recoup some of last year’s 26 per cent slump. The broader benchmark Nifty 50 index is up 7.2 per cent so far in 2023. Operating profit growth for the sector is expected to grow at a 12 per cent -15 per cent range over fiscal 2025-2026, faster than revenue growth, as the brokerage sees an expansion in margins for all the companies in its coverage.

It initiated coverage on six Indian IT stocks, with “buy” ratings on top firms such as Infosys and TCS as well as the smaller LTIMindtree, citing strong revenue growth expectations It is more downbeat on Wipro, and Tech Mahindra, recommending a “sell” on a weaker margin profile. Goldman Sachs also gave HCL Tech a “neutral” rating, seeing risks to near-term revenue growth. However, it viewed the company as “well-placed” in the medium term.