India's IT sector may still face growth challenges, but falling valuations have made the space attractive for long-term investors, according to Pankaj Pandey of ICICI Direct. He believes patience will be the key, as the sector is unlikely to see a sharp earnings recovery anytime soon.
Pandey said revenue growth across the IT sector has remained in single digits and the impact of AI-led pricing pressure could continue for another one to two years. He added that while margins may improve gradually, a return to 7-8% dollar revenue growth is still some time away. According to him, investors should buy IT stocks only with a two-to-three-year horizon, as he does not expect a V-shaped recovery in earnings.
He said Tier-II IT companies such as LTIMindtree, Persistent Systems and Coforge are better placed than Tier-I firms because of their stronger growth outlook. Pandey added that larger companies will take longer to adapt to industry changes.
Beyond IT, he said export-oriented sectors like textiles and two-wheeler makers could benefit from improving overseas demand. He also remained positive on defence, saying both PSUs and private companies stand to gain from rising government orders, while recommending a long-term investment approach despite rich valuations.
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