India’s IT companies, already struggling this year, face a potentially prolonged recovery, with analysts suggesting fiscal 2026 may not bring the anticipated upturn, according to a report in Reuters. This pessimistic outlook follows Accenture’s recent quarterly report, which highlighted persistent weakness in discretionary spending and overall demand. The Indian IT index has declined by 15.3% this year, on track for its worst quarter since June 2022, with major companies like TCS, Wipro, Infosys, and HCLTech experiencing losses ranging from 11.2% to 18.1%, Reuters reported.
Accenture becomes first ‘tech casuality’
Accenture, a global IT services giant and a key indicator for the Indian IT industry, reported “constrained” discretionary project spending and a lack of significant client budget increases. Accenture CEO Julie Spellman Sweet attributed some of the slowdown to the Trump administration’s “Department of Government Efficiency” initiatives. “Federal represented approximately 8% of our global revenue and 16% of our Americas revenue in FY 2024. As you know, the new administration has a clear goal to run the federal government more efficiently. During this process, many new procurement actions have slowed, which is negatively impacting our sales and revenue,” Sweet stated during a call with Wall Street analysts.
Global trade tensions to delay recovery
The report also highlighted that escalating global trade tensions, driven by new U.S. tariffs, have heightened concerns about a slowdown in the United States, a critical market for Indian IT firms. “Whatever has happened in the last two months has created a higher level of uncertainty in terms of how the first half of fiscal 2026 will pan out and what impact it will have on the FY26 recovery rate,” Amit Chandra, deputy vice president at HDFC Securities, told Reuters.
Kotak Institutional Equities analysts, as cited by Reuters report, predict that “softening demand recovery and weak mega deal flow in fiscal 2025 will result in lower incremental revenue from mega deals in fiscal 2026 for Indian Tier-1 IT. Companies will also face net headwinds from early stages of gen AI adoption.”
Chandra, quoted in the report, noted that while sectors like banking, financial services, and insurance (BFSI) and healthcare had shown signs of recovery, recent uncertainties have led clients across various sectors to adopt a “wait-and-watch mode,” potentially curtailing their spending.
Indian IT has limited exposure, but
Citi Research, according to Reuters, estimates that IT companies within its coverage could see revenue growth of 4% in fiscal 2026, mirroring fiscal 2025. Citi analysts, as quoted, stated that “Indian IT has limited exposure,” they cautioned that this could “increase competitive intensity in other segments.”