According to a survey released on Monday, the macroeconomic climate for the Indian IT sector is much better than it has been in the previous two years, which should spur a renaissance in 2025.

According to the ‘India IT Services 2025’ research by BNP Paribas India, the Fed rate decrease is no longer a pipe dream but is well under way, inflation seems to be under control, and the US election is over with the incoming administration being viewed as business-friendly.

“The BNPPE Equity Strategy team has identified several themes for 2025 that we believe will benefit the Indian IT services industry, including retail consumer-friendly themes, inventory replenishment, and dollar strength,” stated Kumar Rakesh, analyst for IT and Auto.

While markets are already at all-time highs, the Fed is lowering interest rates. This has typically been optimistic for the market, the research said.

Additionally, additional budgetary relief is anticipated as a result of the Republican sweep. The prognosis for enterprise capital expenditures is improving, while consumer confidence in the US has remained strong.

All of this is good for Indian IT services, in our opinion. Nifty IT has rarely underperformed in a year when margins and profits growth both rebound, which is probably going to happen in 2025, Kumar added.

Technology now receives a ‘Overweight’ rating instead of ‘Neutral’ as the Global BNPPE sector rating.

“Even though valuations appear stretched, we are comfortable with the valuations of our O/P-rated stocks due to the sector’s outperformance in earnings per share (EPS) and the strong correlation between forward EPS growth and price to earnings (P/E),” the statement continued.