Demand trends for the domestic IT services sector continue to be positive on the back of improvement in the US economy, according to a Barclays report.
The accelerating US economy has led to a pick-up in discretionary IT spends and deal signings by domestic vendors remain strong, the report said.
However, it warned of rupee appreciation.
The recent 5 per cent appreciation of the rupee and a rotation away from IT services are headwinds.
"While a slight dip in March quarter numbers could have raised worries, we believe the underlying fundamentals of the IT sector remain robust," the report said, adding that a re-acceleration of the US macro picture along with strong contract signings should lead to near-term growth momentum.
Commentary from global players like Accenture and consultants like ISG also suggest a strong environment for IT services.
Furthermore, the domestic business could revive over the next two quarters.
It said Tata Consultancy Services (TCS), Wipro, HCL Tech and Infosys were its top picks.
