128309In view of reduced inflation and expenses, will it be right to invest in IT stocks?

It is the news that the corporate sector, lakhs of engineering students and employees and even stock market investors have been waiting eagerly for more than a year now and there are early indications on the horizon that the IT services sector is showing some green shoots of revival, The Economic Times has reported. Hiring specialists have told the newspaper that there is a 10% increase in hiring intent in the end of January.
Though experts have predicted that there might be negative growth in cumulative headcount in Q4 (January-March), the prospects appear brighter from April.
The IT sector – that not only generated huge wealth and employment for the country but also transformed its identity on the global stage – suffered a lot of weak markets in 2023. Thanks to the economic slump in the developed economy of the west, top five IT companies in the country sacked more than 61,000 employees last year.
Apart from TCS the IT majors shunned recruitment from campuses in 2023.
But many IT companies are hopeful about growth prospects from April this year. Significantly, IT companies predict hiring activity a quarter in advance.
However, experts also say that the recruitmnts that are being done right now are limited to filling roles that have remained vacant for a few quarters.
“While attrition has come down, it was still there and replacements were selective. Companies had recast their hiring strategies. But now as deals are ramping up slowly companies have started replacing the talent that left over the past few quarters. We saw a slight improvement in hiring intent from IT services,” said Sunil C, the CEO of TeamLease Digital. Since January 15, they have witnessed 10% rise in hiring intent in the IT sector.
This comes against a backdrop of a freeze in permanent and contracted employment for some time. Until Q3 (October-December), the requirement flow has been slow. The TeamLease Digital head added that Q3 can hardly be a benchmark since it is traditionally considered a weak quarter.
The real indicator is a comparison between Q2 (July-September) and Q4 (January-March). This comparison has thrown up a 10% growth in requirement flow for IT services. And they pertain to roles across the board.
“However, these green shoots do not change the larger hiring sentiment. Q4 headcount will still be negative. Current demand does not indicate that there will be a major increase in headcount even in Q1 of FY25. We will have to watch how this quarter and the April-June quarter proceed to predict if Q2 onwards we can expect a spurt in hiring,” Sunil added.
“Despite global headwinds, the hiring sentiment in India is marginally higher compared to other global counterparts. After many months of negative dip our studies indicate hiring growth in the IT sector to move to positive sentiment in Q2, and further rising in subsequent quarters. Overall, the IT job market in India is looking very promising for the next three months, with significantly higher demand compared to last year,” said Manu Saigal, director – of general staffing, Adecco India. She said there might be a rise in hiring in January compared to December. She described it as natural progression.
Saigal also stated that programming languages such as Python, Java, and JavaScript are in demand from companies along with skills in cybersecurity, cloud computing and data analytics.
“We continue to add headcount to fuel the growth in the coming quarters. So we remain optimistic…I do feel confident we will capture some reasonable spend, and we’ll continue to maintain our growth momentum,” C Vijayakumar, CEO and MD of HCLTech. Right now, HCLTech is the third largest and fastest growing IT major.
The slump in 2023 as a sharp contrast to 2021-22 when there was a flood of hiring. That the IT firms are expecting demand to revive from April is indicated by the fact that there was a rally in IT stocks this month.
Wipro, too, expects demand to pick up.
“We have enough talent pool available. And for certain specific skills that we require, we’ll continue to hire. So the current environment, we feel that it’s from supply will not be a constraint. As demand picks up for the quarters, we’ll definitely look at hiring in more bigger numbers (sic),” Saurabh Govil, chief human resources officer of Wipro said while announcing the company’s Q3 results.