India’s information technology industry may be entering the early stages of recovery after nearly two years of slow growth, according to a recent outlook from Nomura. The brokerage firm believes easing global uncertainty and clearer revenue pathways for artificial intelligence (AI)-driven services will help revive momentum across the sector.
Nomura notes that sector-wide revenue growth remained soft at 1.8% in FY25 and is likely to pick up only marginally to 2.9% in FY26. However, the firm projects a more notable improvement by FY27, estimating revenue growth of 4.5% for large-cap IT companies as enterprise spending gradually strengthens.
The report highlights that each major technology wave in the past has expanded the market opportunity for IT service providers — a trend expected to repeat with AI. As organisations integrate advanced AI systems and adopt more complex digital architectures, system integrators are expected to play a critical role in execution and transformation.
Despite the improving outlook, near-term challenges persist. Early-stage AI-driven cost efficiencies, cautious spending behaviour, and slower deal conversions continue to weigh on demand.
Nomura expects a more robust turnaround once businesses move beyond proof-of-concept deployments and scale AI investments — a shift anticipated over the next 12 to 18 months. This phase is also expected to accelerate demand for cloud migration, data modernisation, and related services.
On profitability, Nomura forecasts moderate improvement by FY27, with earnings before interest and taxes (EBIT) margins expanding by:
- 30 basis points for large IT firms
- 50 basis points for mid-tier companies
Optimisation in workforce planning and improved utilisation rates are expected to support margin gains.
While sector valuations remain appealing, Nomura advises selective stock positioning. The report names:
- Infosys and Cognizant among preferred large-cap picks
- Coforge in the mid-cap category
- eClerx among small caps
- Wipro as a contrarian buy idea
Summary
Nomura forecasts a gradual revival in the Indian IT sector by FY27, supported by expanding AI monetisation and improving global macro trends. Revenue growth is expected to accelerate from 1.8% in FY25 to 4.5% by FY27, with profitability also improving. The firm remains selective on stock calls, identifying Infosys, Cognizant, Coforge, and eClerx as key picks, along with a contrarian view on Wipro.
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