Indian IT Sector: A Rough Road Ahead
The Indian IT sector, once the country’s most reliable growth engine, is facing a rough road ahead and will need a fundamental reset to stay competitive amid rapid technological shifts, according to Helios Capital CEO Samir Arora. Speaking with NDTV Profit on the outlook for markets and various sectors, Arora said the next phase of growth will belong to platform-based companies, while traditional IT services firms will have to reinvent their business models to adapt to the changing global landscape.
Traditional IT Services Model Under Pressure
Arora pointed out that the traditional IT services model, which was built on a labour-intensive pyramid structure is now coming under pressure due to the rise of artificial intelligence. Artificial intelligence is changing the way IT companies operate, and the traditional model is no longer sustainable. “Earlier, the bottom of the pyramid was doing the execution work for the middle, while the top managed client relationships. Now AI sits at the bottom — the whole structure looks more like an egg than a pyramid. That reset has to happen if IT companies are to prosper in the future,” he said.
Challenging Period Ahead for IT Sector
He added that the sector could go through a challenging period before it stabilises, as automation and AI integration begin to alter cost structures, pricing models, and the nature of outsourcing contracts. “IT will have a rough period. It needs to change its business model,” Arora noted. This change will not be easy, and IT companies will have to invest heavily in new technologies and training to stay competitive.
Optimism About India’s Equity Market
Despite short-term pain in IT, Arora remains optimistic about India’s overall equity market, predicting mid-to-high single-digit growth by December 2025, supported by improving earnings and structural reforms. He said the groundwork for recovery has already been laid through a combination of RBI’s liquidity infusion and the government’s GST rate cuts, both of which are expected to revive consumer sentiment and spending. “GST cuts were the push India needed to bring consumers back to the market,” he said.
Expensive Valuations Affecting India’s Performance
While the market is seeing some recovery, it has not had a great year so far. Arora also acknowledged that India’s expensive valuations have been one of the main reasons for its underperformance relative to other emerging markets, particularly China. However, he believes this correction phase creates a more attractive entry point. “Our underperformance in the EM index is close to 30%, something not seen in 30 years. But that’s what makes me more bullish,” he said.
Earnings Growth to Pick Up in December 2025 Quarter
He expects earnings growth to pick up in the December 2025 quarter, especially as supply chain bottlenecks ease and consumption normalises. This will be a welcome relief for investors who have been waiting for a turnaround in the market. With the Indian equity market expected to grow, it is essential for investors to stay informed and make informed decisions.
In conclusion, the Indian IT sector is facing a rough road ahead, and a business model change is necessary to stay competitive. While there are challenges ahead, there are also opportunities for growth and investment. Investors should stay informed and make informed decisions to navigate the changing landscape of the Indian equity market. For more information on stock market news and investment tips, visit our website.