Mumbai: Global financial services firm Morgan Stanley said that the Indian IT sector, which has under performed the broader markets due to global headwinds could start attracting investor interest as it believes that a turnaround in global IT spending is imminent.
“Our January 2018 proprietary global chief investment officer (CIO) survey showed an acceleration in IT services growth relative to 2017 for the second consecutive quarter. The overall increase in CIOs’ IT spend expectations is in line with positive commentary from ISG, an industry consultant,” Morgan Stanley said.
According to it, recent deal wins cited by companies such as the $2.25 billion deal by TCS last month indicate potential conversion of deal pipelines.
European geography has been strong and North America is likely to pick up in mid-2018 as banking clients start to spend. Morgan Stanley noted that digital deals have started bulking up from a few million dollars to $40-50mn, which along with the deepening digital adoption could improve revenue growth rates and visibility for Indian software firms.
The IT sector under-performed the Sensex in 2017 as revenue growth was tepid while investment in the business and a strong rupee kept margins in check. While management commentary on deal pipelines and spending intentions were upbeat through most of 2017, it did not translate into deal wins and growth thus impacting both sentiment and stock performance.
Meanwhile, Gartner Inc, a leading research and advisory company on Tuesday said that the worldwide IT spending is projected to total $3.7 trillion in 2018, an increase of 4.5 percent from 2017.
“Global IT spending growth began to turn around in 2017, with continued growth expected over the next few years. However, uncertainty looms as organizations consider the potential impacts of Brexit, currency fluctuations and a possible global recession,” said John David Lovelock, vice president, research at Gartner. Despite this uncertainty, he said businesses would continue to invest in IT as they anticipate revenue growth though their spending pattern will shift. “Projects in digital business, blockchain, IoT and progression from big data to algorithms to machine learning to artificial intelligence (AI) will continue to be main drivers of growth,” he added.