Indian IT Firms Face High Expectations Amid Market Correction Fears

Infosys Ltd., Wipro Ltd., and HCL Technologies Ltd. are currently grappling with heightened expectations from investors, who remain anxious about a potential market correction. The Indian IT sector confronts this situation in the 2025 financial year, anticipated as a period of recovery following a prior slowdown induced by reduced spending from US-based clients, which had previously restricted revenue growth to the low single-digits.

The earnings results for the April-June quarter indicated improvement, yet meeting the elevated expectations for the entire year may prove challenging. Analysts at HSBC Global Research stated, “While demand is improving, it is not beating existing estimates.” They highlighted that the improvements seen in the banking, media, and telecommunications sectors might not suffice to exceed consensus expectations. Insights into the effects of interest rate cuts and the finalization of 2025 budgets by certain US firms will be pivotal.

This scenario unfolds amid speculations of a market correction in India, which heightens scrutiny over whether earnings across various sectors can justify the high valuations that followed the Nifty 50‘s bull run last year. This comes especially after Tata Consultancy Services Ltd., a major competitor, fell short of profit expectations recently.

In other parts of Asia, Taiwan Semiconductor Manufacturing Co. (TSMC) and Contemporary Amperex Technology Co. (CATL) appear to have weathered respective challenges. TSMC reported a better-than-expected 39% rise in quarterly revenue, although concerns persist about the longevity of AI-driven growth momentum. CATL is expected to have achieved significant profit growth despite intense battery competition.

Looking forward, several key developments are anticipated: Avenue Supermarts is projected to have seen double-digit profit growth in the second quarter, though slower store expansion could affect future earnings. Additionally, HCL Technologies is expected to sustain its annual services revenue growth guidance of 3% to 5%, despite challenges from restrained IT spending by clients in telecommunications, media, and technology, as noted by Nuvama Institutional Equities.

Reliance Industries is likely to report earnings bolstered by Jio‘s pricing strategies, even though petrochemicals profits seem to have declined significantly, as highlighted by analysts at Emkay Research. Meanwhile, Infosys is broadly predicted to align its yearly revenue projections with market consensus, whereas Wipro’s presentation is expected to be less dramatic. Both companies could witness margin expansion, thanks to reduced visa expenses and efficient cost-management strategies.

Elsewhere, TSMC is anticipated to endure challenges from diminished demand for Apple Inc.’s iPhone 16, potentially affecting chip orders, yet maintain positive revenue guidance for Q4, according to JPMorgan. Nestle India could report single-digit sales growth, influenced by price adjustments responding to soaring commodity prices, as suggested by analysts at Motilal Oswal.

CATL’s quarterly growth is anticipated to be strong, despite declining global battery demand and pricing. The company benefits from size and cost advantages, ensuring margin stability and overcoming competition, while tapping into new growth areas like the energy-storage business, according to Bloomberg Intelligence. Furthermore, CATL progresses in unveiling new technologies aimed at heavy-duty vehicles, building on its success in the electric car battery market.