The Setup
Indian IT sector Q4 FY26 earnings season begins this week. Consensus expects revenue growth in the 5–7% range in constant currency terms — a meaningful improvement from the 2–4% growth of FY25, when client discretionary spending was under pressure.
What to Watch
Total Contract Value (TCV) of new deal wins is the leading indicator — both TCS and Infosys reported strong Q3 deal pipelines, suggesting Q4 conversion should be healthy. The other key metric is EBIT margin: with attrition stabilised and fresher hiring resuming, margins should be flattish to slightly expanding.
Sector Valuation
Large-cap IT is at 25–28x FY27 earnings — not cheap, but not expensive for the quality of earnings and dollar revenue defensiveness these companies offer. Mid-cap IT (Mphasis, Persistent, Coforge) trades at a premium to large-caps, which is unusual historically. A rotation toward large-cap IT may occur if earnings disappoint from mid-cap names.