Infosys, Hexaware, Mphasis, TechM, LTIMindtree: HSBC picks its top IT bets

US corporate earnings have been among the strongest in recent years, but growth in Indian IT has remained muted. HSBC attributed a large part of this weakness to structural factors such as productivity gains and share loss to Global Capability Centers (GCCs). At the same time, it sees a cyclical element, with potential for growth to pick up from currently subdued levels.

In a note, the brokerage said recent results of top US corporates across banking, retail, energy, insurance and other sectors point to a strong business environment. Still, many of these firms remain cautious about the macro outlook, weighed down by tariff uncertainties and delayed investments. 

“As confidence returns, we expect spending to improve, making 6–7 per cent growth for Indian IT in FY27 achievable,” HSBC said. For the medium to long term, it forecasts 3–5 per cent CAGR growth in constant currency.

HSBC prefers LTIMindtree, Tech Mahindra, and Infosys in the large-cap space, while in the mid-cap basket it favours Mphasis, Hexaware, and Persistent Systems. All are rated Buy except Persistent, which is a Hold.

On the structural side, HSBC noted that nearly two-thirds of Indian IT revenues come from application development, maintenance and testing services. Productivity in this segment has improved consistently, with the migration of legacy systems to cloud and microservices reducing downstream maintenance demand. More recently, AI-driven efficiencies have further lowered development costs, pressuring revenue growth— a trend HSBC expects to persist for the next two to three years.

It added that Indian IT already commands a sizeable share of global IT spend—about 20 per cent by revenue and 35–40 per cent by volume—making high growth harder to sustain. The shift of incremental work to GCCs is another structural headwind, and while growth there may moderate, HSBC does not see the cycle reversing.

“With US corporates reporting robust numbers, technology spending should get a lift as companies look to stay competitive. This should provide some tailwinds, keeping alive the possibility of a 6–7 per cent growth revival in FY27,” it said.

On Thursday, the BSE IT index was trading at 82,113.48, up 255.63 points or 0.31 per cent.