IT sector report and expert insights in detail

India’s Information Technology (IT) sector has been the country’s shining beacon since the late 1990s, growing from a cost-efficient outsourcing destination to a global powerhouse in digital transformation, consulting, and engineering services. Initially driven by Y2K remediation, the sector pivoted to application development, then to enterprise transformation, and now to cutting-edge cloud, cybersecurity, and AI-based services. Today, India accounts for over 55% of the global outsourcing market, making it a critical cog in the global technology supply chain.

Market Size and Growth Trends

1. As of FY2025, the Indian IT sector is estimated at ~$260 billion in revenues (NASSCOM).
   
2. Historical 5-year CAGR (FY20–FY25) is approximately 9–10%.
   
3. Exports contribute nearly 80% of the revenue, with the US and Europe being the biggest markets.
   
4. Future growth is expected at a CAGR of 8–10% over FY25–FY30, driven by cloud, AI, and engineering services.

Revenue and Segmentation 

Export Revenues: ~80% of the sector
Domestic Revenues: ~20%, driven by government digitization and India’s startup ecosystem

Service Lines:

• Application Development & Maintenance (30%)
• Infrastructure Management (15%)
• Engineering & R&D Services (14%)
• Business Process Management (20%)
• Consulting & System Integration (21%)
  

Verticals:

• BFSI (largest, ~40% of sector revenue)
• Retail & CPG (~15%)
• Healthcare & Lifesciences (~10%)
• Manufacturing (~10%)
• Others (telecom, energy, etc.)

Major Players and Competitive Landscape

• Top 5 Players by market cap: TCS, Infosys, HCLTech, Wipro, Tech Mahindra
• Mid-tier challengers: LTIMindtree, Mphasis, Coforge, Persistent
• Specialized engineering firms: Tata Elxsi, Cyient
• Recent M&A:
  
  • LTIMindtree’s integration
  • Tech Mahindra’s focus on engineering acquisitions
  • Wipro’s series of small bolt-on deals
    
• Competitive intensity is high in both large-scale transformation and smaller digital projects, with global firms (Accenture, Capgemini) active in India as well.

Growth Drivers : 

1. Digital Transformation Demand: Global enterprises are accelerating digital adoption, benefitting Indian IT.
2. Cloud Migration: Majority of large clients moving workloads to the cloud; India’s players have built strong cloud partnerships (AWS, Azure, GCP).
3.  GenAI and Automation: Huge opportunity for code generation, business processes, and AI-led cost savings.
4. Engineering R&D: India emerging as a hub for design engineering and automotive software.
5. Cybersecurity: Surge in cybersecurity spending worldwide boosts specialized revenues.
6. Startup and GCC (Global Capability Center) ecosystem: India hosts over 1,800 GCCs, acting as growth feeders for IT service providers.

Challenges and Risks

1. Talent Shortages: Demand for skilled resources is still outpacing supply.
2. Pricing Pressure: Fierce competition means clients continuously negotiate prices.
3. Geo-political Uncertainty: US visa rules, EU data laws, and geopolitical tensions may disrupt operations.
4. Macro Slowdowns: Weakness in BFSI, retail, or healthcare verticals could ripple through growth.
5. Attrition & Reskilling: Retaining top tech talent is costly and complex.

Future Outlook

1. Hiring to stabilize, but upskilling to remain a top priority
2. AI + Cloud convergence will drive large deals
3. Increased engineering offshoring from Europe/US
4. Growing importance of cybersecurity offerings
5. India’s large domestic market starting to add to growth

Conclusion and Recommendation by Ketan Mittal

The Indian IT sector continues to stand tall as a world-class hub for innovation, digital transformation, and engineering talent. While short-term challenges like pricing pressure and global macro headwinds exist, the sector’s diversified client base, high quality of talent, and strong deal pipeline give confidence for long-term growth.

Recommendation: Investors can consider a staggered approach to investing in top-tier Indian IT stocks, with a long-term horizon, while keeping an eye on cyclical slowdowns in the US/Europe that may impact short-term revenue growth.

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