Citi Research has no Buy ratings on any of the 11 India IT stocks it covers, according to Surendra Goyal, Head of India Research at Citi Research. As reported by NDTV Profit, Goyal explained that while IT stocks have rebounded from their lows, the move represents a relief rally driven by low valuations rather than fundamental improvement. He characterized this as 'the anti-AI trade' and emphasized that the current rally lacks the underlying strength needed for sustained value creation.
The biggest concern facing the IT sector is its weak growth trajectory over the past six quarters, with growth remaining stuck in the 2-3% territory across Citi's entire coverage. According to Goyal's analysis reported by NDTV Profit, unless this growth inflection occurs, meaningful value creation remains elusive. Citi sees no clear trigger for a meaningful growth inflection over the next 12-18 months, with AI-led productivity gains and rising competition continuing to weigh on the sector. Global Capability Centers (GCCs) are still taking market share from traditional IT services providers, with Goyal noting that 'GCCs are still taking away share'. Some industry CEOs are already highlighting productivity gains of up to 60% over the next three to four years, adding to pressure on traditional IT services demand and further challenging the sector's growth prospects.
Goyal highlighted that limited scope for valuation expansion exists while industry growth remains subdued. As reported by NDTV Profit, he explained that 'the industry growth automatically caps the multiples which any stock in that particular sector can trade at'. Even companies executing well do not offer attractive risk-reward at current valuations, with some well-performing names trading at very lofty valuations. Citi remains cautious on inorganic growth, warning that acquisitions do not always create value and risks can emerge well after deal announcements.
For now, Goyal remains unconvinced that the IT growth cycle is about to turn. According to his assessment reported by NDTV Profit, 'You are stuck in that low-growth trajectory, and for any meaningful value creation, that has to change, which I just don't see happening at least anytime soon'. The analyst emphasized that 'This is more like a relief rally on low valuations, and it's a bit of what investors call the anti-AI trade'. Some industry CEOs are already highlighting productivity gains of up to 60% over the next three to four years, adding to pressure on traditional IT services demand and further challenging the sector's growth prospects.
