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DRChoksey Research Report
Nifty IT stocks showed major corrections during Q3-Q4 FY24 due to a slowdown in discretionary spending, delay in deal decisions, and subdued demand from major economies.
However, Q1 FY25E will likely be slightly better than the previous quarters. We do not anticipate significant developments in Q1 FY25E; however, the sector could witness some early signs of growth.
These early signs of growth are likely to be driven by lower cuts on discretionary spending and emerging opportunities in AI, consulting, engineering research and development, healthcare, banking, financial services, and insurance.
Spending on AI is increasing, often at the expense of reductions in other areas of IT budgets.
Ebit margin will be influenced by seasonal factors and the outcome of wage revisions for individual companies. However, on a year-over-year basis, it is expected to remain steady or show a slight improvement, with no major reductions in margins anticipated.
The announcements of large and mega deals have generally fallen short of our expectations for most companies. However, it is expected to bounce back in Q2 FY25E or H2 FY25E.
Verticals such as BFSI and Communications have remained under pressure for the past few quarters; many companies under our coverage have reported deal wins in BFSI vertical in Q1 FY25E. The momentum of deal wins would be expected to continue in the coming quarters.
IT firms would remain likely to provide cautious guidance as it would be too quick to revise their guidance upwards.
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