Mounting US Inflation Expected To Drive More Business For Top Indian IT firms

The inflation rate in the US is again at a record high. In the last month, in May, headline inflation has surged by 8.6% YoY, and also gained on a month-on-month basis. In April April, the inflation rate surged by 8.3% YoY. The US Federal Reserve has recently hiked its interest rate to control this. The mounting US inflation rate has been concerning all the corporates, investors, and economists.

However, this can be a gain for the major IT firms. Some analysts are thinking, "Top software services firms such as Tata Consultancy Services (TCS), Infosys, and Wipro are expected to gain from a cost optimization-led increase in outsourcing work to India, as inflation concerns loom large in the United States. There are higher chances of digital transformation work shifting to India to manage affordability for North American and European clients."

IT spending growth and opportunity for Indian IT firms

On the hand, brokerage firm Kotak Securities has recently reduced the FY23-FY25 revenue estimates by 2-10% for leading IT companies. The brokerage firm is now estimating that long-term transformation projects of 3 to 5 years to see a slowdown. Kotak Securities is anticipating international IT spending growth at 3-4% for the calendar year of 2023 and 7% for 2022.

However, it can be a gain for the Indian IT firms to grow during this period. "Indian companies will continue to gain from localization and digital transformation programs," Kotak Securities stated. However, the Indian inflation rate is also rising now, which can further affect the profit margins.

Stock prices of top Indian IT firms

The stock price of Tata Consultancy Services (TCS) is quoted at Rs. 3,066.75 falling 2.39% today on NSE, and the stock price of Wipro is quoted at Rs. 409.70 falling 2.98% today on NSE, making it a good opportunity to buy. On the other hand, the stock price of Infosys was quoted at Rs. 1,390.25 falling 0.50% today on NSE.