Sector Analysis – Indian IT Sector and its Outlook

The Indian IT sector has been facing many issues in the past few months. Digital advancement, as well as other political factors, have caused havoc for the IT industry. Protectionist policies by US President Donald Trump and the UK government (Brexit) has forced Indian IT majors to reduce their employees in India and hire more foreign employees. Such a step is not only causing employment issues but is also leading to revenue losses for the Indian IT sector.


Growth Prospects

The growth in 2017 is expected to be only 5.7%. While the previous year’s revenue growth was 9.1%, this year it is anticipated to grow only by 6.3%. According to Goldman Sachs, it is expected that revenue growth for top 5 Indian IT Service vendors to normalize at lower levels.
Most of the IT stocks are showing a similar trend as can be seen in the recent Q4 earnings: Infosys (down 0.92%), Wipro (down 0.8%), Oracle Financial Services Software (down 0.59%) and Persistent Systems (down 0.48%) edged lower.


Stocks to Consider Buying in the Indian IT sector :

Even though the sector is going through a bearish phase, here are some IT stocks, which value investors can try to keep hold of in their portfolio for the long term:

  • Mindtree : While the large cap IT stocks have disappointed, Mindtree has performed well compared to its large cap peers. The stock has been on a roll and has managed to give a quick recovery.
  • Quickheal Technologies : It is another midcap stock for long term. The company has more than 30 percent market in India for anti-virus technologies. Its earnings are expected to grow in the coming quarters


Thus, it is advisable to focus on those IT organizations which have most of their clients in the domestic market and are less dependent on foreign contracts.

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