Muted demand in store for IT cos in next 6 mths

The customer sentiment indicators are predicting a continuation of the difficulties that the industry has to navigate for at least the first two quarters. We may see growth start improving at the end of June quarter and then building for the rest of the year. However, it is also quite possible that we will not see growth returning significantly until 2025 - PeterBendor Samuel, CEO, Everest Group, tells Bizz Buzz

Sluggish Trend

• Next year may not bring good news for Indian IT industry
• First 2 quarters will see no improvement in IT spending
• Low interest rate in 2024 may not be big enough for changing sentiments
• However, US likely to surpass EU in growth terms next year

Bengaluru: After a washout year in 2023, next year may not bring good news for the Indian IT industry, at least for the first two quarters as important geographies like the US and Europe are not likely to see swift recovery.

Experts are of the opinion that rate reduction by the US Federal Reserve will not be large enough to change the sentiment on the ground, which remains low among enterprises.

“We are expecting 2024 to be a difficult year. At this time, the customer sentiment indicators are predicting a continuation of the difficulties that the industry has to navigate for at least the first two quarters. We may see growth start improving at the end of the second quarter (June end) and then building for the rest of the year. However, it is also quite possible that we will not see growth returning significantly until 2025,” PeterBendor Samuel, CEO of global consultancy firm, Everest Group, told Bizz Buzz.

Earlier, brokerage firm JP Morgan has said in a report that FY24 will be a washout year for the Indian IT industry as overall decision-making and deal ramp-ups remain weak.

Such tepid demand environment has prompted domestic IT firms to reduce their revenue guidance for the ongoing fiscal year. Infosys has trimmed its revenue guidance to 1-2.5 per cent from 1-3.5 per cent given earlier.

Similarly, HCL Tech has brought down its growth guidance to 5-6 per cent for FY24 from 6-8 per cent given earlier.

Market leader Tata Consultancy Services (TCS), Wipro and many mid-tier firms are expected to post single digit revenue growth in the current financial year.

According to experts, 2024 may not see strong revival in the US market, dashing hopes of IT spend coming back next year. Recent US Federal Reserve’s announcements to reduce interest rates three times will provide little solace to clients who are deferring spending decisions for quite some time now.

“Lower interest rates will help. However, small reductions predicted are unlikely to make a huge difference to sentiment,” Bendor Samuel said.

However, the US as a geography is likely to perform better than the European Union (EU) next year. “We are expecting the US to outperform the EU with stronger growth in the Middle East,” he added.

In the past quarters, European Union has been surpassing the US in terms of growth rates. IT spending among European companies has been higher so far this year with many large deals coming the way of Indian IT firms. However, Europe as a geography is likely to slow down next year.

“We expect the healthcare vertical to outperform next year. Similarly, we expect the engineering sector to continue to outperform,” Bendor Samuel said.