Sandip Agarwal of Sowilo Investment Managers signals bullish sentiment for the IT sector, citing easing AI‑driven deflation.
Agarwal said that after a severe deflationary shock last quarter, the sector is poised for a substantial relief, with earnings growth expected to lift net margins across the board.
He projects cumulative EPS growth of 45‑70% over the next three years, a figure that sits well above the 22‑25% average seen in the broader technology index in FY26.
Currency depreciation has inflated reported rupee revenues, but Agarwal notes that most IT firms use rolling hedges, tempering the upside.
Mid‑cap and small‑cap services firms, he argues, offer better risk‑reward, thanks to healthy cash reserves and a growing AI adoption pipeline that could boost bookings beyond the current 20 % YoY.
Looking ahead, Agarwal expects Q3 deal bookings to improve, and he advises investors to monitor the end‑of‑conflict impact on the ER&D sub‑segment before recalibrating positions.