MUMBAI: Demand trends for the domestic IT services sector continue to be positive on the back of improvement in the US economy, according to a Barclays report.
The accelerating US economy has led to a pick-up in discretionary IT spends and deal signings by domestic vendors remain strong, the report said.
However, it warned of the rupee rise.
The recent 5 percent appreciation of the rupee and a rotation away from IT services are headwinds.
"While a slight dip in March quarter numbers could have raised worries, we believe the underlying fundamentals of the IT sector remain robust," the report said, adding that a re-acceleration of the US macro picture along with strong contract signings should lead to near-term growth momentum.
Commentary from global players like Accenture and consultants like ISG also suggest a strong environment for IT services. Furthermore, the domestic business could revive over the next two quarters.
It picked TCS, Wipro, HCL Tech and Infosys as its top picks.