IT stocks: JM Financial sees 4th year of subdued growth; lists Sagility, Mphasis as preferred picks
IT stocks: The brokerage has initiated two pair trades within the sector. It has assigned an 'Overweight' rating to Tech Mahindra while maintaining an 'Underweight' view on Wipro.
- Sep 16, 2026,
- Updated Sep 16, 2026 4:50 PM IST
IT stocks: Brokerage firm JM Financial has initiated coverage on the Indian IT services sector with a cautious and selective stance, citing subdued growth prospects, rising competitive intensity and limited room for margin expansion. The brokerage has initiated two pair trades within the sector. It has assigned an 'Overweight' rating to Tech Mahindra Ltd while maintaining an 'Underweight' view on Wipro. Similarly, Mphasis has been rated 'Overweight', against an 'Underweight' rating for LTIMindtree.
Among the stocks covered, JM Financial has identified Sagility and Mphasis as its preferred picks.
Debates shaping the IT sector
According to JM Financial, investor conversations around Indian IT services companies are centred on four major themes.
The first is the growing emphasis on revenue growth, which could lead to greater competition and increased pricing pressure. The second is the outlook for margins as competitive intensity rises, with currency movements adding another variable to profitability.
The brokerage also highlighted a relatively weak setup for Accenture as it enters FY27, given its low exit growth rate. The fourth key factor is the potential read-through for Indian IT companies from the latest software industry results.
JM Financial expects the benefits of a recovery in software demand to become increasingly visible as enterprise adoption of artificial intelligence shifts from experimentation towards large-scale deployment. However, it warned that productivity-driven revenue deflation could offset some of these gains in the near term.
"Given the near-term challenges to growth, rising competitive intensity and limited margin upside, we remain selective," the brokerage said.
Growth outlook remains subdued
Management commentary from Tech Mahindra, Infosys and Wipro points towards increasing competitive pressure across the industry, JM Financial said.
The brokerage noted that IT vendors are increasingly passing productivity gains from generative AI on to clients through pricing, while the productivity benefits captured by customers remain comparatively limited.
Against this backdrop, JM Financial expects the sector to face a fourth consecutive year of subdued growth. It also believes IT services companies are likely to prioritise revenue growth over margin expansion in the current environment.
The brokerage estimates FY28 constant-currency revenue growth at 4.1%, compared with 3.5% in FY27.
Rupee depreciation offers temporary margin support
Currency movements have emerged as an important support for IT services margins, with the depreciation of the Indian rupee providing a significant earnings tailwind, according to JM Financial.
The brokerage estimates that a roughly 7% depreciation in the rupee during FY27 could boost operating margins by 100-120 basis points. This benefit, however, could mask weaker underlying organic margin performance.
JM Financial warned that a stabilisation or appreciation of the rupee, combined with rising competitive intensity, could put pressure on consensus margin expectations.
IT index underperforms
The NSE IT index has underperformed the Nifty by around 12% on a calendar-year-to-date basis, JM Financial said.
With growth remaining muted, competition intensifying and the scope for margin expansion appearing limited, the brokerage maintains a cautious view on the broader Indian IT services sector and favours a selective approach to stock picking.
IT shares top losers
In Wednesday's trade, TCS, Infosys and Tech Mahindra were the top Sensex losers. TCS stock ended 2.60% lower at Rs Rs 2191.50. Market cap of TCS stood at Rs 7.92 lakh crore. Infosys shares too slipped 1.43% to close at Rs 1060.65 Market cap of Infosys fell to Rs 4.30 lakh crore.
Tech Mahindra shares too ended 1.26% lower at Rs 1555.15. MarkeT cap of Tech Mahindra declined to Rs 1.52 lakh crore.
IT stocks: Brokerage firm JM Financial has initiated coverage on the Indian IT services sector with a cautious and selective stance, citing subdued growth prospects, rising competitive intensity and limited room for margin expansion. The brokerage has initiated two pair trades within the sector. It has assigned an 'Overweight' rating to Tech Mahindra Ltd while maintaining an 'Underweight' view on Wipro. Similarly, Mphasis has been rated 'Overweight', against an 'Underweight' rating for LTIMindtree.
Among the stocks covered, JM Financial has identified Sagility and Mphasis as its preferred picks.
Debates shaping the IT sector
According to JM Financial, investor conversations around Indian IT services companies are centred on four major themes.
The first is the growing emphasis on revenue growth, which could lead to greater competition and increased pricing pressure. The second is the outlook for margins as competitive intensity rises, with currency movements adding another variable to profitability.
The brokerage also highlighted a relatively weak setup for Accenture as it enters FY27, given its low exit growth rate. The fourth key factor is the potential read-through for Indian IT companies from the latest software industry results.
JM Financial expects the benefits of a recovery in software demand to become increasingly visible as enterprise adoption of artificial intelligence shifts from experimentation towards large-scale deployment. However, it warned that productivity-driven revenue deflation could offset some of these gains in the near term.
"Given the near-term challenges to growth, rising competitive intensity and limited margin upside, we remain selective," the brokerage said.
Growth outlook remains subdued
Management commentary from Tech Mahindra, Infosys and Wipro points towards increasing competitive pressure across the industry, JM Financial said.
The brokerage noted that IT vendors are increasingly passing productivity gains from generative AI on to clients through pricing, while the productivity benefits captured by customers remain comparatively limited.
Against this backdrop, JM Financial expects the sector to face a fourth consecutive year of subdued growth. It also believes IT services companies are likely to prioritise revenue growth over margin expansion in the current environment.
The brokerage estimates FY28 constant-currency revenue growth at 4.1%, compared with 3.5% in FY27.
Rupee depreciation offers temporary margin support
Currency movements have emerged as an important support for IT services margins, with the depreciation of the Indian rupee providing a significant earnings tailwind, according to JM Financial.
The brokerage estimates that a roughly 7% depreciation in the rupee during FY27 could boost operating margins by 100-120 basis points. This benefit, however, could mask weaker underlying organic margin performance.
JM Financial warned that a stabilisation or appreciation of the rupee, combined with rising competitive intensity, could put pressure on consensus margin expectations.
IT index underperforms
The NSE IT index has underperformed the Nifty by around 12% on a calendar-year-to-date basis, JM Financial said.
With growth remaining muted, competition intensifying and the scope for margin expansion appearing limited, the brokerage maintains a cautious view on the broader Indian IT services sector and favours a selective approach to stock picking.
IT shares top losers
In Wednesday's trade, TCS, Infosys and Tech Mahindra were the top Sensex losers. TCS stock ended 2.60% lower at Rs Rs 2191.50. Market cap of TCS stood at Rs 7.92 lakh crore. Infosys shares too slipped 1.43% to close at Rs 1060.65 Market cap of Infosys fell to Rs 4.30 lakh crore.
Tech Mahindra shares too ended 1.26% lower at Rs 1555.15. MarkeT cap of Tech Mahindra declined to Rs 1.52 lakh crore.