Expect 2026 to outperform 2025; strong IT earnings recovery still uncertain: Kotak AMC's Harsha Upadhyaya

Harsha Upadhyaya, Chief Investment Officer of Kotak Mahindra Asset Management Company (AMC), has expressed cautious optimism about the Indian market outlook for calendar year 2026 compared with 2025, while underscoring continued headwinds for the IT services sector. In a recent interview with Business Today, Upadhyaya pointed to several factors that shaped a volatile 2025 and how conditions might evolve in the year ahead.

"From a market perspective, we do expect 2026 to be better than 2025, as we have seen the previous calendar year being quite volatile and range-bound as well. That was due to certain factors, such as elevated valuations to begin with, there was also a deceleration in terms of growth that we saw during the year, we did have a kind of a reset in global trade and various other issues," he stated.

Expectations for earnings growth are showing signs of improvement as well, with the market veteran noting that earnings are likely to "inch towards double digits in the second half of this financial year and going forward in FY27, we do expect it to go towards mid-teens."

On sectoral performance, Upadhyaya said the IT services industry continues to present a mixed picture, marked by modest demand and uncertainty over discretionary corporate spending in 2026.

"As far as the IT sector is concerned, the business momentum still continues to be very, very modest," he said. The expert added that commentary from IT firms and their users has not shown a meaningful uptick in spending intentions, making it difficult to "pencil in a very strong earnings growth at this point of time for IT services sector."

Upadhyaya also raised the longer-term question of how disruptive technologies such as artificial intelligence (AI) might impact the traditional IT services model and valuations.

"On top of that, there is also this special mark in terms of how disruptive AI is going to be for the regular IT services and what its impact on the business, on the earnings growth over the next few years," he said.

Despite these challenges, the expert said, "I think the sector has underperformed in a big way over the last 18 months or so. It is a sector with hardly any leverage, strong cash flows, and while growth is difficult to come by, the rest of the financial parameters are quite strong. So, to that extent, if the volatility in the market continues, probably this sector will still be relatively better off."

He added, "However, at this point of time, we are not seeing it outperform on a sustained basis over the next couple of years."