AI presents significant new revenue streams for Indian IT services, despite job displacement concerns. Experts believe AI will expand beyond coding into business processes, creating a larger market. While enterprise adoption is nascent, technology modernization and AI integration will drive growth. Separately, India's residential real estate, particularly luxury housing, shows strong potential, with developers expected to manage rising costs.
Synopsis
AI presents significant new revenue streams for Indian IT services, despite job displacement concerns. Experts believe AI will expand beyond coding into business processes, creating a larger market. While enterprise adoption is nascent, technology modernization and AI integration will drive growth. Separately, India's residential real estate, particularly luxury housing, shows strong potential, with developers expected to manage rising costs.
Artificial intelligence may be creating concerns around job displacement and pricing pressure in the IT services industry, but the bigger picture remains positive, according to Kunal Tayal, Director, Equity Research at BofA Securities.
Speaking to ET Now, Tayal said AI is likely to create new revenue opportunities for Indian IT services firms over the next few years, even as the industry navigates a transition period marked by changing client expectations and evolving technology adoption patterns.
Largest AI use cases
According to Tayal, coding has emerged as one of the largest AI use cases since 2025, which has fuelled concerns that automation could reduce demand for traditional software development services. However, recent advances by companies such as OpenAI and Anthropic suggest that AI applications are rapidly expanding beyond coding into broader business processes.
"It is really on the business process side where IT services companies should find a new total addressable market," Tayal said. He added that partnerships between AI platform providers and major IT services firms indicate that service providers will remain an integral part of the AI ecosystem rather than being displaced by it.
Another major opportunity could emerge from technology modernisation. As AI reduces the cost of implementing technology projects, enterprises may accelerate digital transformation initiatives, creating additional demand for IT consulting and implementation services.
Live Events
You Might Also Like:
Reforms, AI capex peaking could revive interest in India: Candace Browning, BofA Global Research
Enterprise adoption of AI still in its early stages
While enthusiasm around AI remains high, Tayal cautioned that enterprise adoption is still in its early stages. Many organisations are experimenting with AI, but large-scale deployment remains limited due to concerns around data quality, return on investment and operational readiness.
"The technology is still at a nascent stage," he said, noting that adoption is likely to evolve gradually rather than through a sudden surge.
On concerns that AI partnerships may become commoditised because multiple IT firms are working with the same technology providers, Tayal argued that differentiation will come from how effectively companies integrate AI solutions and build proprietary intellectual property on top of existing platforms. Firms that develop unique AI-driven products and capabilities could eventually enjoy higher profitability and stronger competitive positioning.
BofA's assessment suggests that the overall market opportunity created by AI could eventually outweigh the disruption it causes. While some existing work may be automated, new categories of demand are expected to emerge, leading to a larger addressable market for the industry over time.
You Might Also Like:
AI disruption in Indian IT front-loaded, but long-term demand intact: Sushovan Nayak
Gung-ho on residential real estate
Beyond technology, Tayal remains constructive on India's residential real estate sector despite concerns about affordability, wealth effects and interest rates.
He believes fears of the housing cycle peaking are overstated. Home ownership levels in India remain relatively low, leaving significant room for long-term growth. In addition, large listed developers continue to strengthen their balance sheets and expand market share, enabling them to outperform the broader industry even if overall sector growth moderates.
Luxury housing, in particular, continues to stand out. Tayal said the preference shift towards premium and luxury homes that began four to five years ago remains intact, with no clear signs of reversal. While affordability housing could eventually recover, luxury demand is expected to remain stronger in the near term.
Construction costs have risen by roughly 10%, creating potential margin pressure for developers. However, Tayal does not expect builders to pass these costs directly to homebuyers. Instead, developers may offset the impact through other measures, including adjustments in land acquisition costs and project economics.
You Might Also Like:
'India is on the wrong side of the AI trade': Emkay's Nirav Sheth sounds the alarm
For investors, the message from BofA is twofold: AI remains a long-term growth opportunity rather than an existential threat for Indian IT, while the residential real estate cycle, especially in the luxury segment, still appears to have room to run
(You can now subscribe to our ETMarkets WhatsApp channel)
(What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)
Subscribe to ET Prime and read the Economic Times ePaper Online.and Sensex Today.
Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price
...moreless
(You can now subscribe to our ETMarkets WhatsApp channel)
(What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)
Subscribe to ET Prime and read the Economic Times ePaper Online.and Sensex Today.
Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price
...moreless
Why Indian manufacturers may want the rupee to hit 100
Different eras, but current rupee slide has elements of 1991 crisis
Can a Rajan-style NRI dollar-deposit scheme save the rupee?
Iran war impact: Oil prices may be just one among many to pinch you
As West Asia boils, will Dubai’s loss be a GIFT for India?
Stock Radar: After a 24% correction, Max Healthcare breaks key resistance level; analysts see long-term potential
1
2
3