IT cos may see little respite in Q3

The Nifty IT index closed 2023 with a creditable 24% gain, helped in particular by a strong momentum in December after the US Federal Reserve hinted at three potential rate cuts over the course of 2024.

- Harsha Jethmalani

Lower interest rates help the banking, financial services and insurance sector (BFSI), which accounts for a substantial demand for the Indian IT industry, and are likely to spur discretionary spending by companies on software and digital transformation.

Yet, for any meaningful growth in revenue, interest rate optimism needs to translate into higher deal conversions.

The December quarter (Q3) is a seasonally weak one for the Indian IT sector due to furloughs and fewer working days. Further, the adverse impact of furloughs on revenues could deepen amid the prevailing client caution, prioritizing of IT expenses, extended timelines for deal closures, and slower executions.

Segment-wise, the slowdown in BFSI, retail, hi-tech, and communications is expected to continue. Demand recovery in the US and Europe is also expected to be muted.