Weak Rupee Lifts Indian IT Profits, BofA Predicts Strong FY27 Outlook

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AuthorRiya Kapoor|Published at:
Weak Rupee Lifts Indian IT Profits, BofA Predicts Strong FY27 Outlook
Overview

A weaker rupee is set to significantly boost Indian IT companies' profits this quarter, according to BofA Securities. The firm expects a 100 basis point gain. Companies plan to reinvest some of these earnings, while the currency benefit also strengthens the outlook for fiscal year 2027.

Forex Impact and Reinvestment Strategy

A weaker rupee is expected to provide a significant lift to Indian IT companies' profits this quarter, with BofA Securities estimating currency movements will add about 100 basis points to earnings. However, these firms are strategically reinvesting a portion of these gains to strengthen their capabilities and competitive positioning for the long term, rather than fully capturing the immediate financial benefit.

FY27 Outlook and Growth Drivers

This currency advantage is projected to offer crucial support for profitability and earnings expectations extending into fiscal year 2027. BofA Securities forecasts Infosys to maintain its EBIT margin guidance between 20%-22%, with projected FY27 revenue growth in constant currency terms at 1.5%-4.5%. HCL Technologies is anticipated to see similar growth of 2.5%-5.5% year-on-year. Upcoming acquisitions, such as Infosys' purchase of Versent and HCLTech's deal for Jaspersoft and certain telecom assets from Hewlett Packard Enterprise, are also poised to contribute positively. Early closure in FY27 could add approximately 0.7% to Infosys' and 1.5% to HCLTech's annual growth outlooks.

Company-Specific Forecasts

Infosys' Q4 earnings and FY27 revenue guidance are expected to be well-received, despite recent contract developments. For Wipro, a sequential revenue decline of 2% to flat growth may cap near-term upside, as much of its reported growth is inorganic. Tata Technologies Ltd. is also set to see a significant inorganic contribution to its growth figures.

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