Coforge, Infosys, Firstsource are Nomura's top IT picks amid mixed Q2 outlook

Nomura in its latest IT sector note maintained a positive stance on select IT stocks, naming Infosys in large caps, Coforge in mid-caps, and Firstsource Solutions (FSOL) in small caps as its top picks, even as it expects mixed results for the upcoming Q2FY26 earnings season. The brokerage said large-cap IT companies are likely to report modest quarter-on-quarter revenue growth in constant currency terms, with TCS at 0.2 per cent, Infosys 1.4 per cent, HCL Technologies 1.2 per cent, Wipro 0.2 per cent, Tech Mahindra 0.7 per cent, and LTIM 2.2 per cent. Mid-caps and small-caps, however, are expected to outperform, with Coforge estimated to grow 6 per cent and FSOL 2 per cent.

Margins were projected to be mixed, with Wipro expected to see a 60 basis points decline due to ramp-up costs, while Coforge could see the strongest improvement at 190 basis points. Nomura highlighted that demand remains healthy in the BFSI vertical, supported by strong results from global banks, though uncertainties persist around AI-led deflation, H1B visa changes, and tariffs.

The brokerage noted that Infosys and HCL Tech are expected to maintain their annual guidance, with Infosys projecting 1-3 per cent constant-currency revenue growth and a 20-22 per cent EBIT margin, and HCL Tech guiding 3-5 per cent growth with a 17-18 per cent margin band. Nomura also lowered its dollar revenue growth outlook for FY27 for its coverage universe due to higher expected deflation from AI-led productivity gains and revised USD/INR assumptions.

Despite these challenges, Nomura said investors should monitor AI impact on renewals, BFSI demand, and macro uncertainty, while its top picks Infosys, Coforge, and Firstsource remain well positioned to deliver earnings resilience.