AI can help Indian IT sector rebound in FY27: HSBC Global Research
The IT sector, once a virtual engine of India's service industry has been suffering from muted growth for the past two years due to slowdown in the western developed economies. However, a HSBC Global Research report has finally said that IT industry's fortunes can look up in the next financial year, thanks to AI adoption by major companies.
Kolkata: There is finally some good news for the beleaguered Indian IT industry that has been limping through muted growth, compressed margins and challenges on multiple fronts such as slow growth in the big markets, challenges from the flux that AI has unleashed and now steep hike in H-1B visa fees with the Donald Trump government openly pushing for an American-first in IT-related jobs where Indians have had an edge for decades in the US. A HSBC Global Research report has stated that as adoption of AI rises among different companies, discretionary spending by clients can grow in FY27.
"While the near-term demand environment remains soft and unchanged, FY27 is likely to see pick-up in demand driven by recovery in the US macro and increase in demand from IT companies looking to drive enterprise scale AI adoption,” the HSBC Global Research report mentioned.
Significantly, India's biggest IT company TCS has been plagued by retrenching employees as it grapples with the challenges of reorienting its workforce to rise to the new challenges in the emerging global IT needs. There have been reports of big deal bookings and strong pipelines in the first quarter of FY26, but revenue growth guidance has been noted between 1% and 5% from firms such as TCS, Infosys, and HCL Tech.
The most interesting point about the road ahead is the fact that AI could emerge as the growth driver in the next cycle. Indian and global IT companies are of the opinion that AI projects,, which have attempted to improve productivity, are now gradually moving towards powering business growth. Once companies start adopting AI and scale up the adoption, Indian IT service providers will get new opportunity to offer projects to engineer that transformation for their clients and get new ones.
An example in this respect is Accenture that has a large number of employees in India. Between September 2024 and August 2025 its generative AI business rose to $5.9 billion, double that of the corresponding perid a year ago.
The HSBC Global Research report mentioned that modest recovery is possible in FY27. It also quantified the impact of digital transformation and AI-led projects on revenue growth of Indian IT companies -- 2 to 3 percentage point. The lower growth rates and compressed margins of the Indian IT industry have also made the investors cautious -- the broader equity indices have performed better than the NSE IT index.