Infosys, Mphasis, Zensar, Wipro upgraded; Coforge, Hexaware, TechM top MOFSL's AI plays
MOFSL’s preferred plays for the next AI upcycle were Hexaware and Coforge in mid-tier names, and HCLTech and Tech Mahindra among large-caps.
- Nov 24, 2025,
- Updated Nov 24, 2025 8:31 AM IST
MOFSL on Monday said the IT sector’s re-rating continued to hinge on the emergence of a new AI-services cycle, and this phase had largely been a waiting game until the ongoing AI capex cycle moderated. It said the wait may be ending. The domestic brokerage has upgraded IT stocks such as Infosys, Mphasis, and Zensar to 'Buy' and Wipro to 'Neutral'.
"We believe we are at the bottom and the risks skew to the upside. Our analysis suggests outsized gains if this plays out, whereas the current levels already bake in the status quo (GenAI-led deflation, demand apathy). We upgrade our growth estimates to factor in the growth recovery, which will start reflecting in growth rates in 2HFY27, taking full shape in FY28 as enterprises enter full-scale AI deployment. We thus roll over our target prices to FY28E EPS and upgrade the target multiples by 20%," MOFSL said.
Similar to the 2016–18 cloud build-out, the storage, compute and infrastructure layers for AI had been largely put in place, MOFSL said. While capex would continue, MOFSL expected incremental spending to shift towards AI software, platforms and services. It noted that improvements in new LLMs and chips had become more gradual, signalling that the next leg of investment was likely to move up the stack.
MOFSL recalled that during the cloud build-out phase, IT services’ organic YoY cc growth had flattened. As spending transitioned from hardware to services, growth rates recovered. It expected AI services to reach a similar inflection point over the next six–nine months, with revenue momentum improving meaningfully in 2HFY27 and FY28.
IT services’ share in Nifty profits had remained stable at 15 per cent over the past four years, while the sector’s index weight had declined to a decadal low of 10 per cent (compared with a 19 per cent peak in December 2021). MOFSL viewed this as an attractive setup. The brokerage argued that current valuations largely reflected status-quo expectations — GenAI-led deflation and muted demand — whereas any meaningful AI-services adoption could drive outsized gains.
MOFSL upgraded its growth assumptions to reflect a recovery that, in its view, would begin showing in 2HFY27 and take fuller shape in FY28 as enterprises entered scaled AI deployment. It rolled forward target prices to FY28E EPS and lifted target multiples by about 20 per cent. It upgraded Infosys, Mphasis and Zensar to Buy, and Wipro to Neutral.
MOFSL said the first phase of AI spending had been dominated by infrastructure and data-centre build-outs. The second phase — when enterprises moved from experimentation to deployment — historically began once incremental hardware benefits started to flatten.
Citing moderation in LLM and chip improvements, it said the inflection point was approaching. With the GenAI infrastructure stack now largely established, MOFSL expected focus to shift towards modernisation programmes and higher-value services.
The brokerage reiterated that the current AI build-out resembled the early cloud cycle (2016–18), when cloud had initially created headwinds for Indian IT by shrinking legacy service lines and intensifying pricing pressure. Once cloud infrastructure stabilised, however, new revenue pools emerged — application modernisation, cloud-native development, legacy re-architecture, data engineering, DevOps, managed services and security — ultimately driving a multi-year technology-services upcycle.
MOFSL believed AI would follow a similar path. While the infrastructure-heavy phase was suppressing revenue in areas such as legacy ADM and testing, the deployment phase would create new and larger service categories. As in the cloud cycle, the net effect, it said, was likely to be structurally positive.
Digital-engineering leaders EPAM and Globant, which historically acted as early indicators, had delivered improving commentary in recent quarters: stabilising deal pipelines, returning discretionary budgets and early AI-integration work. MOFSL viewed this as consistent with the early stages of a services-led deployment cycle.
MOFSL reiterated that IT services’ four-year steady 15 per cent profit share, versus a decadal-low 10 per cent Nifty weight, created an appealing entry point. It forecast a multi-year recovery driven by AI-services adoption from 2HFY27.
On Infosys, MOFSL said Infosys’s Topaz AI suite and full-stack application capabilities positioned it well for enterprise AI spending. It upgraded growth forecasts, expecting Infosys to deliver 5.5 per cent and 8.6 per cent YoY CC growth in FY27/FY28. EBIT margins were projected at 20.9 per cent and 21 per cent. The target P/E multiple has been raised by 20 per cent, with a new target of Rs 2,150 (39 per cent upside) based on 26x FY28E EPS.
On Mphasis, it said strong TCV momentum pushed 1HFY26 wins above FY25 levels. Client challenges in logistics had normalised. MOFSL expected BFSI to support growth during the transition period. It forecast 10 per cent USD-revenue CAGR and 13.5 per cent PAT CAGR over FY25–28. EPS estimates were raised 4.0 per cent / 9.4 per cent for FY27/FY28, with a new target of Rs 4,100 (49 per cent upside), valuing the stock at 30x FY28E EPS.
MOFSL’s preferred plays for the next AI upcycle were Hexaware and Coforge in mid-tier names, and HCLTech and Tech Mahindra among large-caps.
MOFSL highlighted margin headwinds as IT moved further into fixed-price and outcome-based models. Between FY15 and FY19, the share of fixed-price contracts had risen meaningfully at large-cap vendors, coinciding with softer revenue growth and a 150-bp sector-wide EBIT-margin decline. Productivity had flatlined during that period.
MOFSL on Monday said the IT sector’s re-rating continued to hinge on the emergence of a new AI-services cycle, and this phase had largely been a waiting game until the ongoing AI capex cycle moderated. It said the wait may be ending. The domestic brokerage has upgraded IT stocks such as Infosys, Mphasis, and Zensar to 'Buy' and Wipro to 'Neutral'.
"We believe we are at the bottom and the risks skew to the upside. Our analysis suggests outsized gains if this plays out, whereas the current levels already bake in the status quo (GenAI-led deflation, demand apathy). We upgrade our growth estimates to factor in the growth recovery, which will start reflecting in growth rates in 2HFY27, taking full shape in FY28 as enterprises enter full-scale AI deployment. We thus roll over our target prices to FY28E EPS and upgrade the target multiples by 20%," MOFSL said.
Similar to the 2016–18 cloud build-out, the storage, compute and infrastructure layers for AI had been largely put in place, MOFSL said. While capex would continue, MOFSL expected incremental spending to shift towards AI software, platforms and services. It noted that improvements in new LLMs and chips had become more gradual, signalling that the next leg of investment was likely to move up the stack.
MOFSL recalled that during the cloud build-out phase, IT services’ organic YoY cc growth had flattened. As spending transitioned from hardware to services, growth rates recovered. It expected AI services to reach a similar inflection point over the next six–nine months, with revenue momentum improving meaningfully in 2HFY27 and FY28.
IT services’ share in Nifty profits had remained stable at 15 per cent over the past four years, while the sector’s index weight had declined to a decadal low of 10 per cent (compared with a 19 per cent peak in December 2021). MOFSL viewed this as an attractive setup. The brokerage argued that current valuations largely reflected status-quo expectations — GenAI-led deflation and muted demand — whereas any meaningful AI-services adoption could drive outsized gains.
MOFSL upgraded its growth assumptions to reflect a recovery that, in its view, would begin showing in 2HFY27 and take fuller shape in FY28 as enterprises entered scaled AI deployment. It rolled forward target prices to FY28E EPS and lifted target multiples by about 20 per cent. It upgraded Infosys, Mphasis and Zensar to Buy, and Wipro to Neutral.
MOFSL said the first phase of AI spending had been dominated by infrastructure and data-centre build-outs. The second phase — when enterprises moved from experimentation to deployment — historically began once incremental hardware benefits started to flatten.
Citing moderation in LLM and chip improvements, it said the inflection point was approaching. With the GenAI infrastructure stack now largely established, MOFSL expected focus to shift towards modernisation programmes and higher-value services.
The brokerage reiterated that the current AI build-out resembled the early cloud cycle (2016–18), when cloud had initially created headwinds for Indian IT by shrinking legacy service lines and intensifying pricing pressure. Once cloud infrastructure stabilised, however, new revenue pools emerged — application modernisation, cloud-native development, legacy re-architecture, data engineering, DevOps, managed services and security — ultimately driving a multi-year technology-services upcycle.
MOFSL believed AI would follow a similar path. While the infrastructure-heavy phase was suppressing revenue in areas such as legacy ADM and testing, the deployment phase would create new and larger service categories. As in the cloud cycle, the net effect, it said, was likely to be structurally positive.
Digital-engineering leaders EPAM and Globant, which historically acted as early indicators, had delivered improving commentary in recent quarters: stabilising deal pipelines, returning discretionary budgets and early AI-integration work. MOFSL viewed this as consistent with the early stages of a services-led deployment cycle.
MOFSL reiterated that IT services’ four-year steady 15 per cent profit share, versus a decadal-low 10 per cent Nifty weight, created an appealing entry point. It forecast a multi-year recovery driven by AI-services adoption from 2HFY27.
On Infosys, MOFSL said Infosys’s Topaz AI suite and full-stack application capabilities positioned it well for enterprise AI spending. It upgraded growth forecasts, expecting Infosys to deliver 5.5 per cent and 8.6 per cent YoY CC growth in FY27/FY28. EBIT margins were projected at 20.9 per cent and 21 per cent. The target P/E multiple has been raised by 20 per cent, with a new target of Rs 2,150 (39 per cent upside) based on 26x FY28E EPS.
On Mphasis, it said strong TCV momentum pushed 1HFY26 wins above FY25 levels. Client challenges in logistics had normalised. MOFSL expected BFSI to support growth during the transition period. It forecast 10 per cent USD-revenue CAGR and 13.5 per cent PAT CAGR over FY25–28. EPS estimates were raised 4.0 per cent / 9.4 per cent for FY27/FY28, with a new target of Rs 4,100 (49 per cent upside), valuing the stock at 30x FY28E EPS.
MOFSL’s preferred plays for the next AI upcycle were Hexaware and Coforge in mid-tier names, and HCLTech and Tech Mahindra among large-caps.
MOFSL highlighted margin headwinds as IT moved further into fixed-price and outcome-based models. Between FY15 and FY19, the share of fixed-price contracts had risen meaningfully at large-cap vendors, coinciding with softer revenue growth and a 150-bp sector-wide EBIT-margin decline. Productivity had flatlined during that period.