• Overall IT spending index declined to 60.5 from 67 in June, reaching its lowest level since February 2014, while our IT capital spending index declined to 56.0 from 63.5 in June, reaching its lowest level since June 2016 but remained fairly in an expansionary phase. More importantly for our coverage, Discretionary IT services spending remained constructive and improved modestly vs. June 2019.

• Public cloud adoption momentum continues increasing relative to the June 2019 survey. Our CIO survey averages suggest that 23% of workloads are now on the public cloud (relative to 19% in June 2019). Our survey averages indicate that 43% of workloads will be on the public cloud in 3 years (surpassing the previous high of 38% from our December 2018 and 2016 surveys).

• Specialized Digital players (EPAM, Luxoft, Globant), BPO vendors (Genpact, Conduent, EXL, WNS) and smaller Indian IT vendors (TechM, Wipro, HCL) witnessed an increasing number of clients planning to raise their overall IT services spend with them over the next 12 months.

• Larger Indian vendors, and European providers could see clients decreasing their spend

• Microsoft continues to dominate the strategic vendor rankings. This implies positive read-across for Mindtree (Buy) in our coverage, having Microsoft as its Top Customer (20% of overall revenues) and working around Azure engineering platform and Data Analytics solutions. Microsoft Azure in the current CIO survey was quoted as the preferred Iaas/Paas platform relative to AWS and GCP.

Reiterate our Buy rating on TechM and Mindtree given preference of small Indian IT vendors. We maintain our Neutral rating on large-sized Indian IT vendors TCS and Infosys facing cyclical demand slowdown in their key industry verticals of Financial and Retail.

Disclaimer: The above report is compiled from information available on public platforms. inChat team advises users to check with certified experts before taking any investment decisions.

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