Stories
Indian IT Stocks Poised for Turnaround as AI Fears Ease, Says Moshe Katri
- •Moshe Katri of Wedbush Securities suggests Indian IT stocks are nearing an inflection point as the AI narrative shifts from an ‘apocalypse’ to a hybrid human-AI model.
- •Concerns over rogue AI, data security, and government oversight could benefit traditional IT services firms, creating a role for them in managing sensitive data within a hybrid model.
- •The shift could alleviate pressure on Indian IT companies, which have faced demand concerns due to AI, with valuations currently subdued and institutional ownership low.
- •Katri expects stronger growth in the coming quarters to be the key trigger for a sustained change in sentiment, despite Accenture's recent ‘better-than-feared’ quarter showing modest underlying growth.
- •While Accenture is a key proxy, investors also track TCS, Infosys, Cognizant, and Wipro, with the sector's inexpensive valuations and subdued growth expectations offering room for re-rating if growth accelerates.
Key Questions Answered
Indian IT stocks could see a turnaround as the narrative around artificial intelligence shifts from an "AI apocalypse" to a hybrid model where humans and AI agents work together, alongside growing concerns regarding data security, rogue AI agents, and government oversight. These factors benefit traditional IT services firms that manage sensitive enterprise data.
Accenture reported a better-than-feared quarter featuring strong bookings, growth in consulting matching managed services for the first time in many quarters, and a headcount increase after several quarters of decline. However, Moshe Katri noted that its fiscal 2027 growth guidance of 3-6% indicates underlying growth remains modest and points to general stability rather than a strong recovery.
According to Moshe Katri, the key trigger for a sustained change in sentiment and potential sector re-rating will be accelerated revenue growth, which he expects could emerge over the next few quarters. Currently, valuations and institutional ownership across the sector remain relatively subdued.
