Global brokerage JPMorgan has flagged potential weakness in the Indian IT sector's first quarter performance, warning of 50-100 basis point reduction in FY27 dollar revenue growth estimates. According to reports from CNBC TV18, the brokerage's channel checks with companies and industry participants indicate that June-quarter performance could fall short of current expectations. While earnings per share could remain relatively protected due to favourable currency movements, the subdued first quarter is expected to make it increasingly difficult for IT companies to achieve their full-year growth targets.
As reported by JPMorgan, prolonged geopolitical uncertainty and client-specific challenges have delayed deal signings and project ramp-ups, resulting in slower decision-making by customers. The brokerage noted that demand conditions, which weakened in March, have shown little improvement through April and May. This has led to longer sales cycles and postponement of deal closures across multiple client segments, with the slowdown in signings affecting revenue conversion and growth momentum.
According to JPMorgan's analysis, a subdued first quarter could make FY27 another year of muted growth for the Indian IT industry. The sector typically derives a larger share of growth during the first half of the financial year, making the current weakness particularly concerning for full-year performance. However, the brokerage does not expect companies to lower their FY27 revenue guidance at this stage, as management teams are likely to remain hopeful of a recovery beginning in the second quarter.
Within the sector, JPMorgan prefers Tech Mahindra and Infosys among large-cap names, while Coforge and Persistent Systems remain its preferred picks in the mid-cap space. As reported by CNBC TV18, the brokerage also believes that in the absence of a meaningful acceleration in revenue growth, investor sentiment towards IT stocks will continue to be influenced more by developments in artificial intelligence than by underlying business fundamentals.
