Trump regime, rate cut may augur well for tech-spend cycles: Motilal Oswal

A new regime in America alongside continued rate cuts could augur well for tech-spending cycles which have been depressed over past two years, Motilal Oswal said in its latest note underlining key takeaways for IT services sector from Donald Trump's election win in US.

IT services vendors are now largely immune to immigration shocks, and while re may be definite gross positive push from corporate tax cuts, a more intense tre war could offset some of se benefits, note by Motilal Oswal Financial Services said. IT services' hiring plans are now decoupled from H-1B regime, it observed.

It expects technology spending to trend upwards for calendar years 2026/2027, led by a business-friendly ministration and declining interest rates. technology spending has been depressed over past two years, and Motilal Oswal believes a new regime along with continued rate cuts augur well for tech spending cycle.

"Our analysis focuses on three key vectors: immigration policies; corporate tax rates; and tre war. Our findings indicate that IT services vendors are now largely immune to immigration shocks," it said.

report also analysed how IT services companies fared in earlier term.

Crunching impact of visa and immigration, it said first term of Trump presidency did le to an outsized increase in rejection rates; rejection rates for H1B visas surged from an average of 4.6 per cent prior to 2016 to 15.4 per cent during presidency.

"This was a blessing in disguise for IT services sector; however, companies fundamentally altered ir hiring strategies and increased localised on-shore hiring," it said.

IT services' hiring plans are now decoupled from H-1B regime; number of applications has dipped by 51 per cent from peak of FY17.

"While new ministration may be incrementally positive about skilled immigration, we expect impact to be neutral to marginally positive," according to Motilal Oswal note.

Trump's Tax Cuts and Jobs Act (TCJA of December 2017) reduced federal corporate tax rate to 21 per cent from 35 per cent, along with a few or tax sops for US corporates. key industries that benefitted were BFSI, IT and software, energy, and industrials, report noted.

"What is interesting, however, is that ensuing tre war and tariff regime offset gains from tax cuts for key industries. Our analysis suggests that semiconductors, automotive, steel, manufacturing, and retail companies experienced elevated manufacturing costs and significantly stressed supply chains, nullifying some of impact from se tax cuts," it said.

top-5 Indian IT services companies posted an average revenue growth of 7.5 per cent during 2016-20 when Trump was at helm of White House, while growth was 7.9 per cent during first three years of presidency.

"While fine print on immigration, tax cuts, or tre wars will matter, news reports suggest Trump's ministration will be far more business-friendly as compared to outgoing regime," it said.

Setting context for penning note, brokerage said now that dust has settled following US elections, it is analysing potential impact of incoming Trump ministration on major client industries in US, ir technology spending behaviours, and subsequent effects on IT services' revenue growth rates.

Noting that technology spending has been "depressed" over last two years, it said new regime, along with continued rate cuts, augurs well for tech spending cycle.

Healthcare and US banks will continue to le growth; manufacturing (especially aero and automotive) may face short-term hewinds, as per report.