However, for the month of October that saw a heavy withdrawal of foreign funds from domestic markets, NIFTY IT recorded a meager decline as compared to 5.5% drop in the NIFTY 50 index. In fact, a deeper correction i.e. a monthly drawdown in excess of the latest one had last occurred in March 2020 when the Covid-19 wreaked havoc globally and led to a massive 23.25% tumble in the NIFTY50 index. The index has been witnessing a steady upmove thereafter with the last one year or so leading to a particularly impressive spike in the NIFTY50. The corrective phase in October, thus, could be interpreted as a deviation from the nearly four and half year long sustained rally.

IMF retains India’s GDP growth at 7%

The International Monetary Fund has cut its global growth forecast for next year and warned of accelerating risks from wars to trade protectionism, even as it credited central banks for taming inflation without sending nations into recession. Global output will expand 3.2%, 0.1 percentage point slower than a July estimate, the IMF said in an update of its World Economic Outlook. It kept the projection for this year unchanged, at 3.2%. Inflation will slow from 5.8% in 2024 to 4.3% next year. According to the latest estimates published in the IMF’s World Economic Outlook (WEO), a much-feared global recession has been averted, the global war against inflation ‘almost’ won, and growth is holding steady. In India, the outlook is for GDP growth to moderate from 8.2 percent in 2023 to 7 percent in 2024 and 6.5 percent in 2025, because pent-up demand accumulated during the pandemic has been exhausted, as the economy reconnects with its potential.

Gartner Forecasts Worldwide IT Spending to Grow 9.3% in 2025

Worldwide IT spending is expected to total $5.74 trillion in 2025, an increase of 9.3% from 2024, according to the latest forecast by Gartner, Inc. Data center systems spending grew by nearly 35% in 2024. While the segment will not see a jump equal to that in 2025, it is still set to grow by almost $50 billion in 2025, Gartner said. This is led by server sales, which are set to almost triple from more than $134 billion in 2023 to $332 billion by 2028, including more than $257 billion in 2025. Spending on software is expected to increase 14% to $1.23 trillion in 2025, up from 11.7% growth in 2024. IT services are expected to grow 9.4% to $1.73 trillion in 2025, up from 5.6% in 2024.

Meanwhile, global semiconductor revenue is projected to grow 14% in 2025 to total $717 billion, according to the latest forecast from Gartner, Inc. In 2024, the market is forecast to grow 19% and reach $630 billion. Following a decline in 2023, semiconductor revenue is rebounding and expected to record double-digit growth in 2024 and 2025. "The growth is driven by a continued surge in AI-related semiconductor demand and recovery in electronic production, while demand from the automotive and industrial sectors continues to be weak, according to a Gartner report.

Despite decline, global PC market is still on recovery track, another report from Gartner noted. Worldwide PC shipments totaled 62.9 million units in the third quarter of 2024, a 1.3% decline from the third quarter of 2023, according to preliminary results by Gartner, Inc. This decline comes after three consecutive quarters of year-over-year growth for the PC market. There were no changes in the top four vendor rankings compared to the third quarter of 2023. Lenovo, HP, Inc., Apple and Acer experienced year-over-year growth, while Dell and ASUS declined in shipments. The U.S. PC market grew 5.6% in the third quarter of 2024, with over 17 million PCs shipped, driven by continued stable macroeconomic conditions. HP maintained the top spot in the U.S. PC market based on shipments with 24.8% market share. Dell followed with 23.6% market share.

India’s exports of software services up 2.8% in FY24

Reserve Bank of India (RBI) has released the data related to the 2023-24 round of its annual survey on computer software and information technology enabled services (ITES) exports. The survey collects details on India’s exports of software services {computer services and ITES/business process outsourcing (BPO) services} as per type of activity, on-site/off-site nature of services, country of destination and modes of supply. For 2023-24 round of the survey, 7,226 software export companies were contacted, of which 2,266 companies, including most of the large companies, responded. The participating companies together accounted for nearly 89 per cent of total software services exports in India.

RBI stated that India’s exports of software services (excluding their sales through overseas commercial presence) increased by 2.8 per cent during 2023-24 to US$ 190.7 billion. Computer services accounted for over two-thirds of India’s total software services exports during the year; BPO services remained the dominant component of ITES exports. Private limited companies recorded higher growth in export of software services when compared to that by public limited companies. The United States of America (USA) was the major software exports destination with 54 per cent share, followed by Europe (31 per cent share), where the United Kingdom (UK) was a major destination country.

The US dollar remained the principal invoicing currency for India’s software exports with 72 per cent share, followed by the euro, the rupee and the pound sterling. Off-site services accounted for 90 per cent of the total export of software services; this share has risen from 80 per cent ten years ago. In terms of modes of delivery, cross-border supply of software services inched up to 83.5 per cent in 2023-24, whereas the share of overseas commercial presence mode of delivery declined to 7.0 per cent from 7.5 per cent in the previous year and 13.7 per cent in 2013-14. Total exports of software services, including services delivered by foreign affiliates of Indian companies, increased to US$ 205.2 billion during 2023-24 (US$ 200.6 billion in the previous year); local software business by such affiliates amounted to US$ 14.5 billion during the year, with the USA and the UK remaining the major destinations.

Outlook:

Amid the ongoing massive sell-off in Indian equities, technology funds have been the performed relatively better in recent times. Benchmark NIFTY 50 slumped over 1% during the month of October alone but NIFTY IT that captures the performance of the IT segment of the market managed to escape unscathed with miniscule losses for the month. Indian IT companies were positioned to benefit from the 50 bps Federal rate cut witnessed last month. However, the prolonged Middle East tensions are seen sending pessimistic sentiments alongside expectation of a less aggressive Federal rate cut as against earlier belief amid incoming US data.

Meanwhile, Tata Consultancy Services (TCS), the largest IT services company in India, announced its financial results for the second quarter of FY25, reporting a rise of five per cent in net profit to ₹11,909 crore on realisations from large deals signed in the previous quarters. The operating profit margin narrowed to 24.1 per cent, down 0.2 per cent from the year-ago period and 0.6 per cent from the April-June quarter.

Infosys has raised its constant currency revenue growth guidance for FY25 to 3.75-4.5% for a second quarter in a row, as against its previous guidance of 3-4%. This has been the seventh revision in the revenue guidance in the last eight quarters for Infosys. Infosys also retained the operating margin guidance of 20-22% for FY25. The IT bellwether had started year with a 1-3% range for its revenue guidance. Infosys reported a profit after tax of ₹6,506 crore for the second quarter ending in September 2024, a 5% year-on-year increase from ₹6,212 crore in the same period last year.

India's third largest IT major, HCL Technologies reported an 10.5% year-on-year increase in net profit for Q2 FY25, reaching ₹4,235 crore, surpassing market expectations. However, on a sequential basis, the company's Q2 net profit saw a slight dip of 0.5%, while revenue grew by around 3%. HCLTech has raised its revenue growth guidance for financial year 2025, now expecting growth in the range of 3.5% to 5%, up from the previous 3% to 5% range. The company expects its margin to range between 18% to 19%, consistent with its earlier guidance.

Table 1. Worldwide IT Spending Forecast (Millions of U.S. Dollars)

Source: Gartner (October 2024)

Table 2: Semiconductors Revenue Forecast, Worldwide, 2023-2025 (Billions of U.S. Dollars)

Source: Gartner (October 2024)