The Indian tech stocks are in focus after Accenture reported the possibility of future order bookings narrowing after indications of spending cut by the US Govt. As the Q4 earnings season looms ahead, all eyes are on the discretionary spend outlook for Indian IT companies. However, most analysts highlight that unlike Accenture, Indian IT companies do not have any significant exposure to US Federal government contracts. Most believe that the situation is unlikely to worsen further unless the macro economic parameters deteriorate further.

The Q4 earnings season will kick start next month. Tech biggie Infosys is all set to declare its Q4 results on April 17. The Q3 earnings season, though muted, indicated some signs of revival in discretionary spending and a healthy order book. This is particularly noteworthy as the Q3 is seasonally weak quarter on account of furloughs.

Nomura on what Accenture guidance means for Indian IT sector

Nomura highlighted that “unlike Accenture, Indian IT companies do not have any exposure to US federal government contracts.” Though the Japanese brokerage pointed out that the risk of clients turning cautious on IT spends due to rising macro uncertainty could increase in the near-term, “Accenture also noted that there have been no pauses from clients on any projects.” This according to Nomura is a key takeaway for Indian IT sector along with the fact that in certain cases, “rising macro uncertainty is prompting Accenture to focus more deeply on cost reduction opportunities upfront.”

The Nomura report stated that Accenture’s Gen AI opportunities is another key focus area for Indian IT sector as the US tech major indicated that they “continue to mature gradually. GenAI bookings for Accenture have increased steadily. In FY24, bookings were $3 billion, while in H1FY25 itself they have touched $2.6 billion.”

Nomura expects “growth for Indian IT companies to bottom out in FY25.” According to them, while a strong recovery of discretionary demand may take a few quarters, it is unlikely to worsen significantly unless there is a very sharp deterioration of the macroeconomic situation. “We believe that the absence of exposure to US Federa Government contracts puts Indian IT companies in a better situation vs Accenture.” They have a Buy rating on Infosys among large caps and prefer Coforge in the midcap IT segment.

Nuvama on what Accenture guidance means for Indian IT sector

Nuvama however poimted out that uncertainty looms large for the tech sector. The “negative read-across for Indian IT Management emphasised the elevated levels of uncertainty in the global economic and geopolitical environment. While Accenture believes it should be able to mitigate the impact on FY25 growth, the future remains uncertain,” added Nomura. The company also derives 8% of revenue from US federal agencies, which is at significant risk due to a cut in consulting spends mandate. In comparison Nuvama also pointed out that Indian IT companies have “negligible exposure to US government.”

Nuvama says “positive on the sector in the medium to long-term, the near-term uncertainty is likely to remain an overhang on the stocks as well as the sector.”

JM Financial on what Accenture guidance means for Indian IT sector

JM Financial too reiterated the point that impact on “India IT Services players seem limited,” given the scrutiny is higher for the top-10 consultants contracted with US federal agencies. That said, “an increasingly uncertain environment, flat CY25 client budgets and no change in discretionary spend is hardly encouraging.” they added.

According to them, “such a backdrop could induce a conservative initial FY26 guidance by both Infosys and HCL Tech. While recent correction has priced in some deterioration, FY26 guide could further reset expectations. Till then, we would stick with TCS, where valuations offer comfort.”