Potential for Indian IT sector stocks likely to see some rerating

Much of the bad news seems priced in, and a gradual recovery in US tech spending could happen from Q2

After disappointing guidances in the first quarter (Apr-Jun) of the 2023-24 financial year (Q1FY24) and valuation downgrades, the Indian IT sector could see some positive repricing as the bad news for IT maybe easing in Q2FY24.

A key negative factor was weaker demand from the US financial sector and from North America in general. The latest GDP (gross domestic product) estimates and sector-specific news suggest that the demand situation may not be quite so bad with a gradual recovery in tech spending in Q2. In addition, growth in the engineering and R&D outsourcing (ERD) segment could be stronger than in