Shares of major Indian IT companies, including Tata Consultancy Services (TCS) and Tech Mahindra, slipped by as much as 3% as investors booked profits ahead of the Q3 earnings season, which begins on January 12 with results from TCS and HCLTech.
Why IT stocks are under pressure
- Tepid earnings expectations: Brokerages expect another muted quarter for the IT sector due to slow global demand, delayed client spending, and cautious outlooks from key markets such as the US and Europe.
- Profit booking: After a recent run-up in IT stocks, investors are locking in gains ahead of earnings announcements.
- Macro uncertainty: Concerns around global growth, US interest rates, and enterprise tech spending continue to weigh on sentiment.
Brokerage outlook
Most analysts anticipate:
- Flat to low single-digit revenue growth in constant currency terms
- Margin pressure due to wage hikes and pricing challenges
- Cautious management commentary, especially on discretionary spending and deal ramp-ups
What to watch
Markets will closely track:
- Management guidance on demand recovery
- Deal wins and pipeline commentary
- Margins and hiring trends
Until there is clearer visibility on a revival in global IT spending, IT stocks may remain volatile around the earnings season.
