Though the current macro environment remains weak, the structural demand outlook for IT sector remains intact. We continue to believe that the macro challenges will ebb by H1 FY24 and the situation will start improving in the later part of the year.
This should be followed by healthy recovery in FY25E with improved visibility for clients and catch up in tech spends.
Normalisation in hiring, higher fresher additions, lower attrition, improvement in utilisation and lesser reliance on sub-contractor expenses should drive margin expansion over the medium term.
Valuations have significantly corrected from their peaks as we believe that the concerns on macro environment have already been factored into the valuations.
We remain selective in the space and view any correction in the preferred names as an opportunity to accumulate further. Bloomberg