Best of the Week: IT earnings signal demand recovery, margins still strain

Dear reader,

India’s IT earnings season is delivering cautious cheer. Revenues are coming in better than expected, deal pipelines look healthier, and management commentary suggests demand is no longer deteriorating. Still, rising costs are keeping profitability under strain.

Infosys reported December-quarter revenue of $5.1 billion, up 0.45% sequentially, and raised its full-year growth guidance to 3-3.5%. Demand from financial services, energy and healthcare clients improved, aided by AI-led modernization work. Net profit, however, fell 11% quarter-on-quarter to $747 million due to higher wage costs.

Tata Consultancy Services posted $7.51 billion in revenue, growing 0.6% sequentially, with net profit rising 2.7% to $1.5 billion. Margins stayed flat at 25.2% despite absorbing higher labour costs. HCLTech delivered the strongest growth, with revenue of $3.79 billion, up 4.1% sequentially, and profit climbing 10.5% to $537 million.

The takeaway is simple. Demand is stabilizing, but managing costs will decide who truly wins this cycle.

On to the best of Mint’s work from this week:

Supreme Court taxes Tiger Global’s Flipkart gains

The Supreme Court has ruled that Tiger Global must pay capital gains tax in India on its $1.6-billion exit from Flipkart in 2018, overturning a Delhi high court verdict. The court held that Tiger’s Mauritian entities were controlled from the US and amounted to impermissible tax avoidance, despite holding tax residency certificates. It said treaty benefits under the India-Mauritius Double Tax Avoidance Agreement cannot apply where structures lack real commercial substance. The judgment reshapes how India interprets tax treaties, dilutes the protection offered by residency certificates, and empowers tax authorities to scrutinize offshore investment structures more closely, potentially triggering fresh litigation for foreign investors.

The pan-India film wave is losing momentum

Not long ago, pan-India films felt unstoppable. Baahubali cracked open the Hindi belt, and successes like Pushpa, RRR, and KGF convinced producers that scale, stars, and spectacle could travel across languages. A decade later, that confidence is fraying. Big budgets and louder marketing have not guaranteed audiences, while several dubbed releases have quietly fizzled out in North India. Rising promotion costs, cultural disconnects, and faster OTT releases have further weakened theatrical prospects. Viewers, now spoilt for choice, are more selective. The pan-India idea is not dead, but its easy promise of nationwide appeal is clearly fading.

The curious afterlife of herbal cigarettes

Herbal cigarettes were meant to help smokers quit. Ironically, most smokers hated them. Too bland, too weird, too… pointless. Yet here they are, nearly a decade later, quietly becoming a ₹100-200 crore wellness-lifestyle category. From Ayurveda-inspired dhumapana to cannabis-infused calmers, these products have reinvented themselves for Gen-Z and stressed urban millennials chasing “cleaner” habits. Are they healthier? Doctors remain sceptical, as burning anything still produces toxins. But as tobacco gets costlier and wellness goes mainstream, herbal smokes are no longer about quitting cigarettes. They’re about identity, aesthetics, and experimentation.

A cracks-in-the-code moment for Infosys

Infosys may be staring at an uncomfortable gap in its order book. The IT major risks losing over $150 million a year from Daimler, nearly a third of a $400-million relationship, after execution and billing delays pushed the German auto giant to scout for a new vendor. That’s about 0.7% of Infosys’ revenue, not fatal, but painful in a slow-growth, AI-disrupted market. With parts of the mega $3.2-billion deal still unrenewed, the question is no longer growth, but replacement. Can Infosys backfill this hole fast enough?

Why Chabahar matters more than tariffs

Donald Trump’s latest tariff warning, 25% duties on countries doing business with Iran barely rattles India’s trade math. Imports from Iran are already negligible, and even exports form just 0.3% of India’s shipments. But look closer, and the anxiety shifts. What about India’s strategic bet on Chabahar port, now staring at fresh sanctions uncertainty? And what if unrest in Iran spills over into West Asia again? Oil markets remember June 2025, prices jumped, shipping costs soared, nerves frayed. With Iran a key Opec producer, could geopolitics undo the calm oil outlook for 2026?

The talent gap behind India’s eyewear boom

India’s eyewear boom has hit an unexpected bottleneck, not customers or stores, but optometrists. As chains like Lenskart scale at breakneck speed, trained eye-care professionals remain in short supply. The workaround? AI-enabled remote eye testing. By centralizing optometrists and “beaming” them into stores, companies are squeezing more output from scarce talent—and it’s working on volumes. But does faster testing dilute clinical judgment? Experts warn optometry isn’t just about prescribing glasses; it’s often the first line of defence against diabetes, glaucoma, or thyroid disorders.

Electronics set to catch up with IT by 2030

India’s electronics manufacturing industry is on track to grow nearly three times faster than IT services and could match it in revenue by 2030, driven by policy support and global supply chain shifts, according to a senior government official. Electronics manufacturing will need to grow at a 32% CAGR to reach $500 billion in revenue by the end of the decade, compared with about 12% growth expected for IT services. While electronics remain smaller and lower-margin today, incentives launched since 2020 have drawn global players such as Foxconn and helped scale domestic firms such as Tata Electronics and Dixon Technologies. Challenges persist, including thinner margins, lower wages, and fewer jobs than in IT.

India’s GDP numbers are about to be reset

India is entering the final phase of using a GDP framework that is over a decade old. On 7 January, the statistics ministry projected 7.4% real growth for FY26, but those numbers may age quickly. In February, the government will roll out a revised GDP series with 2022-23 as the new base year, replacing the 2011-12 framework. Once adopted, growth rates, nominal GDP levels and key fiscal ratios could all be recalculated. First advance estimates are based on partial data and often see sharp revisions within months. Over the past decade, gaps of up to 90 basis points between early and later estimates have been common. Economists already expect FY26 growth to be revised up as full-year spending and tax-cut effects show up.

Tata Motors and Mahindra step up launches in fight for No.2 spot

Tata Motors and Mahindra are intensifying their product push as the race for India’s second-largest carmaker heats up in 2026. Tata will kick off with a facelifted Punch, followed by new and upgraded models, many focused on electric vehicles. Mahindra has already refreshed key SUVs and plans further updates across EV and ICE portfolios. The battle comes as stricter CAFE emission norms loom from 2027. Mahindra ended 2025 marginally ahead of Tata in retail sales, with both overtaking Hyundai. Analysts say both firms are well placed to grow, backed by strong EV pipelines and platform investments.

Why time in the market beats timing it

With markets near record highs, many investors are waiting for a correction before investing. The logic sounds sensible, but data shows it rarely improves long-term outcomes. Studies tracking the Nifty 500 reveal that returns for investors who start at market highs, lows, or random points converge over time. Even those who consistently invested at yearly peaks earned only slightly lower returns than “perfectly timed” investors. What hurts far more is staying out and missing a handful of strong market days. The evidence is clear: steady investing through SIPs, staying invested, and periodic rebalancing matter far more than trying to predict market bottoms.