TCS, Infosys, Wipro, HCL Tech: Top-5 IT stocks' m-cap slips to RIL as AI disruption bites

Indian IT stocks have taken a sharp beat down lately led by the AI disruption. Top tier IT companies have crashed nearly up 50 per cent from their peaks, which select bluechips technology counters wiping out a major chunk of their valuations and investor wealth from their pocket. This has resulted in steep ratings and earnings estimate cuts for the IT stocks leading to sector-wide downgrades.

To put in perspective, the combined market capitalization of top five IT companies has fallen to the level of Reliance Industries (RIL). The total mcap of Tata Consultancy Services (TCS), Wipro, Infosys, HCL Technologies and Tech Mahindra has took a hit of more than 46 per cent, plunging to 18.15 lakh crore as of July 2026 from record levels of Rs 33.71 lakh crore in August 2024.

Compared to this, Reliance Industries Ltd, the most valued Indian company, commands a marketcap of Rs 17.65 lakh crore. However, it has also seen a correction of 16.7 per cent from the levels of Rs 21.2 lakh crore in June 2024. A couple of years ago, India's largest software major TCS was competing with Mukesh Ambani's RIL for the numero uno stop in India Inc's mcap.

Indian IT stocks have witnessed a sharp correction as investors reassessed the growth outlook amid slowing global technology spending and rising uncertainty around artificial intelligence. Large enterprises have become more cautious on discretionary IT budgets due to geopolitical tensions, macroeconomic uncertainty and a weaker demand environment, leading to delays in deal closures and slower project ramp-ups. 

At the same time, the rapid adoption of Generative AI has intensified pricing pressure, with automation and AI-driven productivity gains reducing demand for traditional IT services. Brokerages have also cut earnings estimates and target valuations for several companies, warning that AI-led deflation, muted revenue growth and conservative management guidance could continue to weigh on the sector. 

JP Morgan and JM Financial have flagged a weak near-term outlook for Indian IT services companies ahead of the Q1 FY27 results, citing GenAI-led pricing deflation, geopolitical uncertainty and tighter enterprise technology budgets as key pressures on growth. 

Both brokerages said spending on AI tokens and cloud is taking away from traditional technology services demand, while Accenture’s recent commentary has added to concerns over the pace of recovery. TCS is set to announce its quarterly results for April-June 2026 period on Thursday, July 09, officially kicking off the Q1 result season.

JP Morgan said the sector remains stuck at 2-3 per cent revenue growth over the past three years and that recovery prospects are still unclear. JM Financial said even the seasonally strong first quarter of FY27 is likely to be weaker than earlier expected, with disruption from the Middle East conflict and continuing AI-led pricing pressure weighing on demand, though a weaker rupee could offer some support to margins.

JP Morgan said AI deflation is still only in its second year and could create further headwinds over the next two years. It has cut its medium- and long-term growth estimates, said it does not expect large-cap firms to return to mid-single-digit growth, and now sees them hovering around 3-4 per cent. The brokerage has also reduced target P/E multiples by 10-25 per cent and now models scale-firm multiples at 12-15 times.

According to JP Morgan, first-quarter revenue growth assumptions have been lowered across companies because of delays in deal closures, ramp-ups and revenue conversion, with client indecision linked to geopolitical uncertainty and rapid changes in AI.

It said Accenture’s results and guidance suggest the weakness may extend into Q2 FY27. JP Morgan expects Infosys to cut its FY27 constant-currency revenue guidance to 1-2.5 per cent excluding Optimum, HCLTech to lower Services guidance to 1-3.5 per cent, and Wipro to guide for -2-0 per cent sequential growth in Q2 FY27.

JP Morgan downgraded HCLTech and Wipro to underweight from neutral, saying consensus estimates for FY27-28 still face 5-9 per cent downside despite the stocks falling 31 per cent and 33 per cent this year, against the NSE IT index’s 29 per cent decline. It also downgraded Tata Technologies to underweight. Its preferred picks are TCS, Infosys, Tech Mahindra, Coforge, Persistent and Sagility, while its top avoids are Wipro, HCLTech, Tata Technologies and LTM.

JM Financial said Accenture’s latest commentary also points to a risk of further earnings downgrades in Q2 FY27, keeping investors focused on FY27 guidance and the demand outlook. The brokerage expects constant-currency revenue growth in Q1 FY27 for the top six Indian IT services firms at 0.7 per cent to 6.6 per cent YoY, or -1.2 per cent to 2 per cent quarter-on-quarter including acquisitions.

For mid-tier companies such as Mphasis Ltd, Coforge Ltd, Persistent Systems Ltd and Hexaware Ltd, it has pencilled in growth of 6.7 per cent to 16.2 per cent year-on-year (YoY), led by Hexaware. Tata Technologies is expected to post 2.4 per cent quarter-on-quarter services growth, while Sagility may report 14.2 per cent year-on-year growth.

JM Financial expects Infosys to lower the upper end of its FY27 constant-currency revenue guidance to 1.5-3 per cent from 1.5-3.5 per cent, while keeping margin guidance at 20-22 per cent. It also expects about 1.2 per cent contribution from Optimum.

Wipro may guide for -1-1 per cent QoQ constant-currency growth in Q2, including 60 basis points from Mindsprint, while HCL Tech is expected to keep its FY27 services growth guidance at 1.5-4.5 per cent and margin guidance at 17.5-18.5 per cent. JM Financial said Tech Mahindra and Infosys may do relatively better among large-cap peers, while Hexaware and Mphasis are also seen reporting a healthy quarter. Tata Technologies could stand out in Q2 as large deals ramp up.

On global cues, JM Financial noted that Accenture cut FY26 revenue guidance to 3-4 per cent from 3-5 per cent, citing a $100 million hit from the Middle East conflict and about $400 million impact in EMEA from slower decision-making, while Cognizant kept CY26 guidance unchanged at 4-6.5 per cent.

JM Financial said it prefers TCS over Wipro, Tech Mahindra over HCL Tech and Mphasis over LTIMindtree in near-term pair trades, and remains cautious on the sector while preferring Infosys, Mphasis and Sagility. Overall, both JP Morgan and JM Financial have signalled a cautious stance on Indian IT stocks ahead of the Q1 FY27 earnings season, with demand weakness, AI-led deflation and global uncertainty remaining the main concerns.

After the latest revision, JM Financial has given 'buy' rating on Infosys (Target Price: Rs 1,230), Mphasis  (Target Price: Rs 2,715), Sagility (Target Price: Rs 55), Firstsource Solutions (Target Price: Rs 285) and Capillary Technologies (Target Price: Rs 630).

It has an 'add' rating on TCS (Target Price: Rs 2,205), Tech Mahindra (Target Price: Rs 1,525), Coforge (Target Price: Rs 1,610), Persistent Systems (Target Price: Rs 4,755), Hexaware Technologies (Target Price: Rs 565 ),  IKS Health (Target Price: Rs 1,810), Black Box (Target Price: Rs 1,000) and CE Infosystems (Target Price: Rs 870).

JM has 'reduce' tag for stocks like  HCL Tech (Target Price: Rs 1,020), Wipro (Target Price: Rs 165), LTM (Target Price: Rs 3,285), KPIT Technologies (Target Price: Rs 620) and  Tata Technologies (Target Price: Rs 700).