According to CNBC TV18, Srikanth Velamakanni, Co-Founder and Group Chief Executive of Fractal, predicts that the pain affecting Indian IT services stocks is temporary, with structural challenges expected to largely play out within 12 to 18 months as AI reshapes how technology work gets done. However, recent developments suggest this optimistic timeline may be under threat. As reported by Mint, analysts are already questioning whether Indian IT's Big Five can meet the full-year guidance they laid out in April after Accenture fell short of expectations. Amit Chandra, vice-president at HDFC Securities, stated that "FY27 might not be better than the preceding year" due to the prolonged impact of geopolitical tensions in West Asia. Bandhan Mutual Fund's Manish Gunwani now puts the odds at 60:40 that Indian IT services escapes becoming a value trap, though he acknowledges the sector's genuine AI disruption risks.
As reported by CNBC TV18, Velamakanni highlighted a significant opportunity gap in the technology sector, noting that technology spending is growing at 13% annually, far outpacing global economic growth of 2-2.5%. However, Mint reports that automation has eaten into IT firms' revenues and sent the share prices of the Big Five plunging more than 30% since the start of the year. The AI disruption is now more severe than initially anticipated, with Kotak Institutional Equities analysts expecting AI-led revenue deflation of up to 3-3.5% annually over the next three years. Much of this uncertainty stems from advancements in AI tools that are no longer limited to automating tasks but are now used to develop software and craft entire sales pitches, prompting clients to rethink their engagement with IT firms. Gunwani notes that free cash flow yields are now 7-9%, comparable to fixed-income returns, indicating clear value in the sector.
According to Mint, analysts expect Indian IT's Big Five to follow a trajectory similar to Accenture's recent guidance revision. Accenture trimmed the upper end of its full-year revenue growth guidance to 4% from 5%, narrowing the range to 3-4% as new order bookings in its traditional IT services business weakened. The company reported new orders worth $19.3 billion, its lowest in the last six quarters. Infosys expected full-year growth of 1.5-3.5% in constant currency terms, higher than the 0-3% growth outlined for FY26. Wipro expected a revenue decline of up to 2% in constant currency in the first quarter, compared to a year ago when it anticipated a decline of 1.5-3.5%. HCLTech expects growth between 1-4% in constant currency, compared to 2-5% growth outlined in April 2025.
As reported by CNBC TV18, Velamakanni acknowledged that much of the new spending is going toward AI infrastructure, but expects services demand to eventually expand through the Jevons paradox dynamic: as AI makes each unit of work cheaper and faster to deliver, the total volume of work demanded rises sharply. However, Mint reports that both Infosys and HCLTech have hinted at revenue deflation due to AI in FY27. HCLTech's management said it might face 2% to 3% deflation, and Infosys's management indicated compression is typically in areas where AI foundation models are highly efficient. The sector is expected to consolidate post a muted Q1FY27, with Anand Rathi Institutional Equities noting that "FY27 large-cap organic growth may be weaker than last year, exacerbated by the inflationary macro environment". Gunwani notes that the debate essentially comes down to two opposing forces: productivity benefits from AI versus increased demand from cheaper technology adoption.
