India IT services: Indian IT should hope for the global AI ‘bubble‘ to continue

Research evidence excerpt

India IT services: Indian IT should hope for the global AI ‘bubble‘ to continue

8 July 2026

Equities

IT Services India IT services

Indian IT should hope for the global AI ‘bubble’ to

continue India

◆ Any moderation in global AI investments and the AI narrative is Yogesh Aggarwal*

not a positive read-across for Indian IT, in our view HeadHSBC ofSecuritiesResearch,and IndiaCapital Markets (India) Private Limited

yogeshaggarwal@hsbc.co.in

◆ The IT sector will still be impacted by tech deflation, while any +91 22 2268 1246

incremental business will be curtailed in that scenario PrateekAnalyst, Maheshwari*,India IT ServicesCFA

HSBC Securities and Capital Markets (India) Private Limited

◆ On a positive note, valuations are at a bottom, in our view, and prateek.maheshwari@hsbc.co.in

+91 98 1937 0718

may improve if the global AI narrative moderates Sagar Desai*

Analyst, India IT Services

We note the widespread perception in the market that Indian IT is a beneficiary of a HSBC Securities and Capital Markets (India) Private Limited

sagar.desai@hsbc.co.in

softening global AI narrative/investment cycle. We think this belief is misplaced. In +91 83 6919 9927

our view, any “bubble burst” or slowdown in AI investment may offer some relief to

Indian IT valuations but is unlikely to support growth. In fact, if the AI investment * Employed by a non-US affiliate of HSBC Securities (USA) Inc, and is

cycle were to soften sharply (hypothetically), we believe this would be negative for not registered/ qualified pursuant to FINRA regulations

Indian IT as well. The broader technology deflationary cycle is already underway and,

even if the AI narrative moderates, it is unlikely to reverse the current trend, in our view.