New Delhi, Jan 5 (NationPress) The revenue growth of the Indian IT sector is projected to rebound to 4-5 percent in FY27, which is anticipated to lead to high-single-digit EPS growth, according to a report published on Monday.

The analysis by HSBC Global Investment Research indicates that while IT stocks have risen by approximately 15 percent from their lows, their performance in 2026 might align more closely with the overall market trends.

"The outlook shows signs of improvement, yet we now predict the IT sector to be in sync with the broader market in FY27. This sector is no longer characterized by long-term double-digit growth, as its long-term stock return trajectory has softened compared to previous years," stated the research firm.

The report anticipates that IT stocks will exhibit greater cyclical behavior, necessitating active management of leading companies amid their cycles and volatility. It also noted that a potential cyclical upswing in CY26 or FY27 could provide additional momentum for IT stocks, building on their recent performance.

3QFY26 was noted to have been affected by weak seasonal performance and is unlikely to present any positive surprises, reflecting mixed signals at the company level.

“Our initial expectations were for IT to outperform the market in 2026, driven by anticipated growth improvements, more favorable valuations, a beneficial base following three years of sluggish growth, and a moderation of the sector's AI concerns,” explained Yogesh Aggarwal, Head of Research at HSBC India.

IT stocks experienced gains of around 15-20 percent from October to December 2025, contrasting with a 6 percent return on Nifty, thus accounting for a significant portion of the expected fundamental improvements in CY2026 or FY27.

The report also highlighted feedback from IT industry clients indicating growing confidence in the business outlook, leading to a higher likelihood of increased IT spending.

Additionally, it pointed out the visibility of the deflationary effects of AI on IT services, with monetization of AI for profitable business deals becoming increasingly attainable.

Motilal Oswal Financial Services expressed a positive outlook for IT services in the medium term, as global technology expenditures are forecasted to gradually recover amid stabilizing macroeconomic conditions and a heightened focus on digital transformation, AI, and efficiency-led initiatives.