Nifty IT slips 20% from 52-week high; time to bet on TCS, Infosys, Wipro, HCL Tech?

At a time when information technology (IT) stocks are struggling to stay afloat, brokerage YES Securities believes the worst may be behind the sector. It noted that the global outlook for IT services is stabilising after multiple downgrades, suggesting that the industry could be nearing a bottom.

The Nifty IT index has fallen 20% from its December 2024 peak, compared with just a 3% slip in the benchmark Nifty 50. Sector heavyweights such as Tata Consultancy Services (TCS), Infosys, HCL Technologies, and Wipro have also shed more than 20% from their respective highs.

Initiating coverage on the sector, YES Securities said the domestic IT firms have already felt the brunt of slowing client spending, with longer deal cycles and softer discretionary demand weighing on growth and valuations. However, with expectations reset and IT budgets showing early signs of stability, the brokerage believes the sector is positioned for a gradual recovery. “Long-term demand drivers remain intact, and valuations at multi-year lows already reflect much of the near-term caution, creating room for upside as spending normalises,” it said.

YES Securities sees potential upside of up to 25% on select IT stocks. It prefers Infosys (target price: Rs 1,842) for its GenAI leadership and execution strength, and Tech Mahindra (Rs 1,905) for margin recovery and recent deal wins. It has a ‘Buy’ on TCS (Rs 3,900), an ‘Add’ on Wipro (Rs 290) due to near-term revenue momentum but remains ‘Neutral’ on HCL Tech (Rs 1,592) and LTIMindtree (Rs 5,531) owing to margin pressures and valuations. Tech Mahindra, for instance, is down 14% from its December 2024 high of Rs 1,807.70.

The US remains the largest market for Indian IT firms, accounting for over 60% of revenues at players such as TCS, Infosys, HCL Tech, Tech Mahindra, LTIMindtree, and Wipro. Near-term growth will hinge on the book-to-bill ratio and the pace of order conversion. “We see immediate green shoots for Wipro and LTIM, as both their book-to-bill ratios and conversion factors improved in the last quarter,” YES Securities noted.

Client commentary also reflects cautious optimism. While investments in AI, automation, and digital infrastructure remain priorities across banking, healthcare, and telecom, decision-making on deal ramp-ups is still slow. Some global clients, including Citibank, Cigna, and Eli Lilly, are shifting towards in-house platforms and vendor consolidation, potentially impacting external IT spend.

Separately, Systematix Institutional Equities remains bullish on TCS among large caps, maintaining a ‘Buy’ with a target price of Rs 3,864. It pointed out that the IT sector delivered modest single-digit growth in Q1FY26. Infosys reported a 4.5% QoQ rise in dollar revenues, while TCS posted a 0.6% QoQ decline. While BFSI remained resilient, manufacturing, retail, and healthcare verticals saw pressure, partly due to tariffs and weak discretionary spending.