NEW DELHI — For the Indian IT sector, the macro-economic environment is far better placed than it has been in the last two years which should drive a revival in 2025, according to a report on Monday.
The Fed rate cut is no longer a hope but well underway, inflation appears to be under control, and the US election is behind with the new administration seen as business friendly, said the ‘India IT Services 2025’ report by BNP Paribas India.
“Some of the themes highlighted by the BNPPE Equity Strategy team for 2025 that we think will aid the Indian IT services sector are dollar strength, inventory restocking and retail consumer-friendly themes,” said Kumar Rakesh, analyst, IT and Auto.
The Fed is cutting rates at a time when markets are already at highs. The report noted that historically this has been bullish for the market.
Also, with the Republican sweep, further fiscal easing is likely. US consumer confidence has been resilient and enterprise capex outlook is improving.
“We view all this as positive for Indian IT Services. We have rarely seen Nifty IT underperform in a year when both earnings growth and margins recover – a likely outcome in 2025,” said Kumar.
The Global BNPPE sector rating for Technology has been upgraded to ‘Overweight’ from ‘Neutral’.
“We see the Indian IT Services sector as one of the only plays in India on the US monetary and fiscal easing cycle available to domestic investors. Key risks to watch would be Trump’s tariff policy, its impact on inflation and Fed’s commitment to rate cuts,” according to the report.
“Although valuations look stretched, the sector’s earning per share (EPS) outperformance and the close correlation between forward EPS growth and price to earnings (P/E) give us comfort on valuations of our O/P-rated stocks,” it added.