Indian IT Sector Outlook: Soft Q1, Steady Deal Activity Ahead

Indian IT firms HCL Technologies and Tech Mahindra are set to report earnings, with quarterly sales projected to have slid 0.6% sequentially due to softer seasonal performance. However, US dollar depreciation may boost firms with higher European exposure. Deals are likely to continue at a steady pace as clients seek software solutions to optimize operations, though discretionary IT spending remains under pressure. TSMC's US expansion plans will also be in focus after the Senate passed a tax bill making it cheaper for chipmakers to build plants there.

Indian IT firms HCL Technologies Ltd. and Tech Mahindra Ltd. are set to report earnings, with quarterly sales projected to have slid 0.6% sequentially due to softer seasonal performance [3]. Analysts at Jefferies predict that the slowdown is primarily driven by a decline in sales, though the impact may be partially offset by the depreciation of the US dollar.

The weakening dollar is expected to provide a tailwind for Indian tech revenues, potentially boosting them by 0.7 to 3 percentage points in the June quarter [4]. This is because Indian IT firms earn a significant portion of their revenues in foreign currencies, but spend in Indian Rupees. Firms with higher exposure to the Euro, Pound Sterling, and Japanese Yen, such as Tata Consultancy Services (TCS), HCL Technologies, Coforge, and KPIT, are likely to benefit from the currency movements.

Deals are expected to continue at a steady pace as clients seek software solutions to optimize operations, despite discretionary IT spending remaining under pressure [3]. The Indian IT sector is also poised to benefit from the US expansion plans of Taiwan Semiconductor Manufacturing Co. (TSMC), following the passage of a tax bill that makes it cheaper for chipmakers to build plants in the US [3].

HCL Technologies, which is expected to report better growth than its peers, may be aided by its research and development and engineering divisions. Tech Mahindra, on the other hand, is likely to see its first-quarter net income rise by 38%, though it has been slower than in previous quarters. Key areas to watch include the company's efforts to improve its margins and boost revenue [3].

The earnings reports from HCL Technologies and Tech Mahindra will provide valuable insights into the state of the Indian IT sector, which has been facing challenges due to macroeconomic headwinds and subdued demand. The reports will also shed light on the impact of currency movements and the US expansion plans of TSMC on the industry.

References:
[1] https://m.economictimes.com/markets/stocks/news/wipro-infosys-adrs-plunge-up-to-6-after-tcs-q1-earnings-announcement/articleshow/122369603.cms
[2] https://www.reuters.com/world/india/indias-tata-elxsi-misses-q1-profit-expectations-auto-industry-stalls-2025-07-10/
[3] https://www.bloomberg.com/news/articles/2025-07-11/india-s-hcl-technologies-tech-mahindra-lift-veil-on-it-industry-outlook
[4] https://m.economictimes.com/tech/information-tech/dollars-slide-may-help-it-add-70300-basis-points-to-q1-revenues/articleshow/122350069.cms