Here is JPMorgan's outlook for Indian tech firms

Leading Indian tech firms are preparing for a tough year ahead as they look to bounce back in the next financial year after what JPMorgan analysts have referred to as a "washout" year.

The financial giant's analysts anticipate investors to closely examine the upcoming second-quarter results and comments from Indian tech companies for signs of a recovery in deal signings.

However, analysts Ankur Rudra and Bhavik Mehta have expressed their reservations, “We remain negative on the sector as we haven't seen a meaningful uptick in demand in our recent checks. We think the overall setup is not as positive as last quarter," Reuters quoted them as saying.

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The Indian tech sector has been grappling with challenges as clients, primarily based in the United States, have reduced tech spending, delayed projects, and even cancelled contracts, citing concerns over slower economic growth and potential long-term interest rate hikes.

"Investors have assumed FY24 is a washout and shifted focus to FY25, hoping for a rebound," Reuters quoted the analysts as saying. They noted that this shift in focus has contributed to the Nifty IT index outperforming the broader Nifty 50 over the past three months.

In the upcoming quarterly earnings reports, the key areas of interest will be deal signings and the distinction between new deals and renewals. This analysis will help assess the potential for growth in fiscal 2025.

However, despite this anticipation, Rudra and Mehta have argued that their recent discussions with industry executives did not reveal "any meaningful optimism of a demand rebound."

"There are green shoots in certain paths, but overall decision-making and deal ramp-ups remain sluggish," both analysts noted.

JPMorgan's outlook for large-cap tech companies in fiscal 2025 suggests high single-digit earnings growth, which is lower than market expectations of double-digit growth. Similarly, mid-cap companies are expected to see low double-digit growth, compared to market expectations of mid-teens growth.

(With inputs from Reuters)

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