Accenture's weaker outlook and softer bookings have deepened concerns over a delayed recovery in India's IT sector, with investors fearing AI disruption and subdued client spending could extend into FY27.
Shares of Indian IT companies fell on Friday after Accenture lowered the upper end of its annual revenue growth forecast and reported lower-than-expected new bookings for the third quarter. The company's results are seen as an indicator of demand trends for Indian software exporters, which derive a large part of their business from global clients.
The Nifty IT index hit a three-year low and has been the worst performing index. Stocks such as Infosys, HCLTech, Wipro, Tech Mahindra and LTIMindtree ended 2-7% lower on the National Stock Exchange.
Accenture also flagged deal delays and said the conflict in the Middle East would have a $400 million impact on its business in the region. The company now expects annual revenue growth of 3% to 4%, compared with its earlier forecast of 3% to 5%.
The company's results added to concerns around India's $315 billion IT industry, which is already facing questions over whether artificial intelligence could disrupt its labour-intensive outsourcing model. Geopolitical and economic uncertainty have also weighed on technology spending as clients defer non-essential projects.
Brokerages said Accenture's comments could delay expectations of a recovery in spending.
"Investors had already priced in a weak start to FY27 but had expected improvement from Q3. But, after Accenture’s earnings it looks unlikely that FY27 will be any better than FY26," an analyst who tracks the sector at Kotak Institutional Equities said.
“Indian IT companies have limited direct exposure to the Middle East, so that might not be a concern. The key risks still are delay in deal closures, and slower ramp-ups," he said.
Jefferies said Accenture's revised revenue outlook could lead to cuts in consensus estimates across the sector. The brokerage said soft growth on a low base could raise concerns over the long-term growth outlook and lead to further derating. It added that the top five Indian IT companies continue to trade at a premium to Accenture.
HSBC said the weak demand environment was a negative read-through for Indian IT companies, but added that the weakness appeared to be driven more by disruptions related to the Middle East than by AI-led productivity gains. The brokerage said the sector continued to lack near-term triggers.
Investors will now look to June-quarter earnings and management commentary from Indian software companies for signs of demand recovery and the effect of AI-related investments on growth in FY27.