Tech Talk

IT story isn’t in tatters, stocks are a different matter

Friday morning’s rout of Indian tech stocks is a signal for sober reflection, not panic. It was waiting to happen after outsourcing major Accenture announced weak revenue growth, and more importantly, a dip in new orders. The company said clients aren’t increasing their overall tech spending for AI, rather, they are reallocating budgets from other heads. So, the size of the pie isn’t growing – yet. Things might have been better, had the Iran war not happened. But for now, orders from West Asia have reduced. There are new worries about the next few months also, as US Fed is expected to hike rates in Sept, which will curb overseas spending by US firms. Basically, investors must temper their expectations as far as tech stocks are concerned.

That said, IT firms have enough orders for now, and secure revenues. So, they are well-placed to prepare for the coming ‘SaaSpocalypse’. And they are – hiring has slowed, headcounts are down, AI investments are up. Indian tech majors know their labour-intensive model won’t be viable soon. But that doesn’t mean they’ll be out of business. They may not be at the cutting edge of AI, but huge manpower will be needed to implement AI projects for clients, train their staff, etc. So, the Indian IT story isn’t ending, even if the market one morning drops IT stocks like a hot potato. Overall, it’s not been a good year for India’s tech stocks, which have underperformed the rest of the market. And when a $315bn industry – by revenue – sneezes, the overall market is bound to catch a cold. That’s what we witnessed on Friday morning. Let West Asia settle down, let clarity emerge on US rates, and corporate spending appetite. And let AI prove it’s really the disruptor it’s made out to be. Only then freak out, if you must.