Motilal Oswal has projected that Indian IT companies will deliver modest earnings in the second quarter of fiscal year 2027, with revenue growth constrained by a sluggish economic backdrop and profit margins staying within a tight range.
Revenue and Margin Expectations
The brokerage forecasts that large IT firms will see quarter-over-quarter revenue growth between -0.5% and 3.0% on a constant-currency basis, while mid-sized companies could expand their top line from 0.0% to 12.0%. For the group as a whole, total revenue, earnings before interest and tax, and net profit are anticipated to climb 12.8%, 13.6%, and 13.4% respectively in rupee terms over the past year.
Profitability is expected to hold steady rather than widen. TCS, HCLTech, Wipro, and LTIMindtree should see sequential margin improvements as the impact of salary increases reverses and cost-cutting initiatives take hold. In contrast, Infosys and Tech Mahindra are projected to maintain flat margins.
Among other companies, Persistent Systems may face margin compression following recent wage adjustments. Meanwhile, Mphasis, Hexaware, and Zensar Technologies are positioned for modest margin expansion as they allocate resources toward growth initiatives, skill development, and artificial intelligence investments. Coforge is expected to remain unchanged due to ongoing integration expenses from its acquisition of Encora.
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Industry Performance and Brokerage Insights
The banking, financial services, and insurance sector will continue driving growth, supported by consistent deal closures and stable client spending. The high-technology segment is also viewed as stable, whereas health, life sciences, aerospace, and energy and utilities are forecast to deliver selective gains through targeted deal execution and AI-enhanced engineering solutions.
Consumer, telecommunications, and travel and transportation segments will likely remain under pressure, as weak discretionary spending continues to weigh on demand.
These trends reflect the broader cautious outlook that has limited gains for Indian IT companies in recent periods. Any meaningful improvement in stock valuations will depend on stronger demand signals and faster revenue growth. Motilal Oswal notes that firms must prove AI-related opportunities can outweigh productivity challenges to justify higher valuations. The brokerage continues to recommend stocks with clearer earnings visibility and strong execution records.
For large-cap companies, HCLTech and Tech Mahindra are highlighted as top choices. Among mid-cap firms, Coforge is also included in the preferred selection.
