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IDBI Capital Report
The Indian information technology services sector is stepping into FY27 with a mixed outlook, according to the brokerage firm IDBI Capital. While artificial intelligence (AI) continues to drive significant client interest and strategic investments, overall demand conditions remain subdued as enterprises stay cautious on discretionary technology spending.
In its Q1 FY27 sector preview, IDBI Capital said IT companies are increasingly using mergers and acquisitions to strengthen AI capabilities, broaden customer bases, expand geographically, and build expertise in emerging technologies. The brokerage believes these investments demonstrate the industry’s efforts to position itself for the next wave of growth despite near-term business challenges.
According to the brokerage, revenue growth is expected to remain soft in the near term as clients continue to adopt a conservative approach toward technology spending. Decision-making cycles have lengthened, particularly for discretionary projects, delaying the conversion of deal pipelines into revenue.
Among key verticals, the banking, financial services and insurance (BFSI) segment remains the strongest demand driver for Indian IT service providers.
In contrast, telecom and certain manufacturing segments continue to face pressure, limiting broader sector growth.
IDBI Capital noted that while AI-related projects are gaining traction and helping offset some weakness in traditional technology services, the pace of AI-led spending is not yet sufficient to fully compensate for slower demand across legacy service lines.
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