BENGALURU, March 21 (Reuters) - India's information

technology companies, among the worst-performing sectors this

year, may not see a recovery in fiscal 2026, analysts said,

after Accenture ( ACN ) flagged weak discretionary spending and

demand in its quarterly report.

Accenture ( ACN ), the world's largest IT services player and a

bellwether for the Indian IT industry, warned on Thursday that

spending on discretionary projects in the quarter "was still

constrained" and flagged no meaningful increase in client

budgets.

Escalating global trade tensions following fresh U.S.

tariffs on trading partners has sparked concerns over a slowdown

in the United States - a key market for Indian IT companies.

"Whatever has happened in the last two months has

created a higher level of uncertainty in terms of how the first

half of fiscal 2026 will pan out and what impact it will have on

the FY26 recovery rate," Amit Chandra, deputy vice president at

HDFC Securities, told Reuters.

India's IT index is currently down 15.3% so far this

year and is set for its worst quarter since June 2022. Top firms

such as TCS, Wipro, Infosys and

HCLTech lost between 11.2% and 18.1% this year.

Analysts at Kotak Institutional Equities said softening

demand recovery and weak mega deal flow in fiscal 2025 will

result in lower incremental revenue from mega deals in fiscal

2026 for Indian Tier-1 IT. "Companies will also face net

headwinds from early stages of gen AI adoption," they said.

Citi Research has estimated that IT companies in its

coverage could see revenue growth of 4% in fiscal 2026, similar

to fiscal 2025, while Morgan Stanley expects growth assumption

to be hurt due to subdued client spending.

According to Chandra, while banking, financial services, and

insurance (BFSI) and healthcare verticals showed signs of

recovery, the last two months' uncertainty has meant that

clients across sectors are "going into a wait-and-watch mode",

and can likely curtail spends.

Accenture ( ACN ) also largely flagged delays and cancellations of

new contracts in the U.S. due to the Trump administration's

moves. However, while "Indian IT has limited exposure,"

according to Citi analysts, this can "increase competitive

intensity in other segments".