TCS, Infosys, KPIT Tech, Mphasis, HCL Tech, Wipro: Kotak cuts IT estimates; check targets
Kotak expects a weak June quarter for Indian IT companies amid GenAI-led deflation and macro headwinds. Check its latest buy, sell and reduce ratings on TCS, Infosys, Coforge, Wipro and more.
- Jul 3, 2026,
- Updated Jul 3, 2026 2:30 PM IST
Kotak Institutional Equities said revenue growth for Indian IT companies is likely to be weak in the June quarter of FY27, with the usual seasonal strength offset by the West Asia crisis and higher productivity pass-throughs in managed services contracts. The brokerage said most large companies could struggle to meet the midpoint of their FY2027 guidance, while faster improvement in frontier model capabilities is forcing additional assumptions of GenAI-led deflation.
Kotak said it has cut FY2027-29 revenue estimates by about 0-1 per cent and reduced fair values by about 2-21 per cent. It said challengers are likely to continue outperforming incumbents, with TCS its preferred pick among incumbents and Coforge, Hexaware and Indegene its preferred challengers.
Revenue outlook Kotak expects incumbent IT companies to report revenue growth in the range of -1 per cent to +1 per cent in 1QFY27, despite the quarter usually benefiting from additional billing days. It said HCLT's services growth could come in at -1 per cent and Wipro's at -1.1 per cent, while TCS is likely to report flat revenue.
Infosys may post 1 per cent organic quarter-on-quarter growth, which Kotak said would be underwhelming, while TechM could report 1 per cent quarter-on-quarter growth. According to Kotak, the main factors affecting growth are the West Asia crisis, with marginal direct and indirect effects, and AI deflation, which is beginning to flow through.
Margins and guidance Kotak expects EBIT margins to remain broadly stable across most companies, except TCS, which has already given wage increases. It said pricing pressure is being cushioned by rupee depreciation, with the rupee down 2.6 per cent QoQ and 9.7 per cent year on year. However, Kotak said this may not immediately lift net profit because of cash-flow hedging, with TechM, LTM, Coforge and Hexaware likely to report meaningful forex losses.
On guidance, Kotak said companies are likely to remain below the midpoint of their annual targets. It expects Infosys to revise FY2027 revenue growth guidance to 2-3.5 per cent from 1.5-3.5 per cent, with the revised range likely to include a 110 basis point contribution from the Optimum acquisition. HCLT needs 0.8-2.7 per cent CQGR in services to meet its 1.5-4.5 per cent annual guidance, against Kotak's forecast of 1.8 per cent. Wipro, Kotak said, may guide for -2-0 per cent revenue growth for the September 2026 quarter.
Valuations, hedging and deals Kotak said its valuation reset reflects a higher GenAI deflation assumption at the upper end of the 3-3.5 per cent band and a higher cost of equity to account for medium-term disruption risk. It said valuations may limit downside, but a rerating would require faster growth or commercial models that capture AI value, neither of which is visible yet.
In hedging, Kotak highlighted wide variation in net profit outcomes, with LTM holding $4.3 billion of hedges, Hexaware facing a $7 million hedge loss, Coforge $17 million and Tech Mahindra $30 million. Kotak also noted a pick-up in 2026 M&A activity, including deals by Accenture, Infosys, Coforge, LTM, PSYS and CTSH, even as organic growth remains muted.
Overall, Kotak said the June quarter is likely to be weak on revenues, margins may stay steady with currency support, and guidance could remain difficult to achieve. It said the sector is still adjusting to GenAI-led deflation, with challengers better placed than incumbents at this stage.
Picks and fair values It has a 'buy' rating on Coforge (Fair Value: Rs 1,640), Indegene (Fair Value: Rs 705), Infosys (Fair Value: Rs 1,220), L&T Technology Services (Fair Value: Rs 3,450), Mphasis (Fair Value: Rs 2,210), Sagility (Fair Value: Rs 52) and Tech Mahindra (Fair Value: Rs 1,600). It has an 'add' view on TCS (Fair Value: Rs 2,450), HCL Technologies (Fair Value: Rs 1,120) and Amagi Media Lab (Fair Value: Rs 625).
On the other hand, Kotak has a 'sell' rating on Hexaware Technologies (Fair Value: Rs 600), KPIT Technologies (Fair Value: Rs 520), Persistent Systems (Fair Value: Rs 4,480), RateGain Travel Technologies (Fair Value: Rs 600), Tata Elxsi (Fair Value: Rs 3,800), Wipro (Fair Value: Rs 150) and Tata Technologies (Fair Value: Rs 470).
It has a 'reduce' rating for stocks like Cyient (Fair Value: Rs 880), eClerx Services (Fair Value: Rs 1,550), Firstsource Solutions (Fair Value: Rs 225) and LTIMindTree (Fair Value: Rs 3,700).
Kotak Institutional Equities said revenue growth for Indian IT companies is likely to be weak in the June quarter of FY27, with the usual seasonal strength offset by the West Asia crisis and higher productivity pass-throughs in managed services contracts. The brokerage said most large companies could struggle to meet the midpoint of their FY2027 guidance, while faster improvement in frontier model capabilities is forcing additional assumptions of GenAI-led deflation.
Kotak said it has cut FY2027-29 revenue estimates by about 0-1 per cent and reduced fair values by about 2-21 per cent. It said challengers are likely to continue outperforming incumbents, with TCS its preferred pick among incumbents and Coforge, Hexaware and Indegene its preferred challengers.
Revenue outlook Kotak expects incumbent IT companies to report revenue growth in the range of -1 per cent to +1 per cent in 1QFY27, despite the quarter usually benefiting from additional billing days. It said HCLT's services growth could come in at -1 per cent and Wipro's at -1.1 per cent, while TCS is likely to report flat revenue.
Infosys may post 1 per cent organic quarter-on-quarter growth, which Kotak said would be underwhelming, while TechM could report 1 per cent quarter-on-quarter growth. According to Kotak, the main factors affecting growth are the West Asia crisis, with marginal direct and indirect effects, and AI deflation, which is beginning to flow through.
Margins and guidance Kotak expects EBIT margins to remain broadly stable across most companies, except TCS, which has already given wage increases. It said pricing pressure is being cushioned by rupee depreciation, with the rupee down 2.6 per cent QoQ and 9.7 per cent year on year. However, Kotak said this may not immediately lift net profit because of cash-flow hedging, with TechM, LTM, Coforge and Hexaware likely to report meaningful forex losses.
On guidance, Kotak said companies are likely to remain below the midpoint of their annual targets. It expects Infosys to revise FY2027 revenue growth guidance to 2-3.5 per cent from 1.5-3.5 per cent, with the revised range likely to include a 110 basis point contribution from the Optimum acquisition. HCLT needs 0.8-2.7 per cent CQGR in services to meet its 1.5-4.5 per cent annual guidance, against Kotak's forecast of 1.8 per cent. Wipro, Kotak said, may guide for -2-0 per cent revenue growth for the September 2026 quarter.
Valuations, hedging and deals Kotak said its valuation reset reflects a higher GenAI deflation assumption at the upper end of the 3-3.5 per cent band and a higher cost of equity to account for medium-term disruption risk. It said valuations may limit downside, but a rerating would require faster growth or commercial models that capture AI value, neither of which is visible yet.
In hedging, Kotak highlighted wide variation in net profit outcomes, with LTM holding $4.3 billion of hedges, Hexaware facing a $7 million hedge loss, Coforge $17 million and Tech Mahindra $30 million. Kotak also noted a pick-up in 2026 M&A activity, including deals by Accenture, Infosys, Coforge, LTM, PSYS and CTSH, even as organic growth remains muted.
Overall, Kotak said the June quarter is likely to be weak on revenues, margins may stay steady with currency support, and guidance could remain difficult to achieve. It said the sector is still adjusting to GenAI-led deflation, with challengers better placed than incumbents at this stage.
Picks and fair values It has a 'buy' rating on Coforge (Fair Value: Rs 1,640), Indegene (Fair Value: Rs 705), Infosys (Fair Value: Rs 1,220), L&T Technology Services (Fair Value: Rs 3,450), Mphasis (Fair Value: Rs 2,210), Sagility (Fair Value: Rs 52) and Tech Mahindra (Fair Value: Rs 1,600). It has an 'add' view on TCS (Fair Value: Rs 2,450), HCL Technologies (Fair Value: Rs 1,120) and Amagi Media Lab (Fair Value: Rs 625).
On the other hand, Kotak has a 'sell' rating on Hexaware Technologies (Fair Value: Rs 600), KPIT Technologies (Fair Value: Rs 520), Persistent Systems (Fair Value: Rs 4,480), RateGain Travel Technologies (Fair Value: Rs 600), Tata Elxsi (Fair Value: Rs 3,800), Wipro (Fair Value: Rs 150) and Tata Technologies (Fair Value: Rs 470).
It has a 'reduce' rating for stocks like Cyient (Fair Value: Rs 880), eClerx Services (Fair Value: Rs 1,550), Firstsource Solutions (Fair Value: Rs 225) and LTIMindTree (Fair Value: Rs 3,700).