Persistent, Mphasis stocks top Anand Rathi's IT bets; brokerage sees turnaround potential in Mastek

Anand Rathi has named Persistent Systems Ltd and Mphasis Ltd as its top picks in the IT sector, while identifying Mastek Ltd as a potential turnaround story. The domestic brokerage expects revenue growth in the IT sector to remain muted in FY27 amid AI-led deflation and geopolitical pressures. It said scaled execution-focused midcap IT companies could benefit from increasing vendor consolidation and cost-take-out deals.

At the same time, the brokerage expects tech-focused midcap IT companies to face pressure as hyperscalers prioritise cost savings amid high AI and data-centre investments.

Anand Rathi, however, remains structurally positive on the IT sector, citing opportunities from AI deployment and integration, legacy modernisation, data optimisation, agentic lifecycle management, token optimisation, small language model deployment and sovereign AI. It expects enterprise software to monetise first through FY27, followed by services as deployment scales into FY28.

Persistent Systems

Persistent remains one of the brokerage's preferred picks, supported by its execution and deal momentum. The company's Q1 revenue grew 16.5 per cent year-on-year (YoY) in constant currency (CC) terms, while total contract value (TCV) rose 120 per cent YoY, aided by a mega deal worth more than $650 million.

This took its last-twelve-month (LTM) TCV to around $3 billion, up 40.2 per cent YoY, providing a strong growth runway, according to Anand Rathi.

The brokerage also highlighted Persistent's AI strategy, including SASVA and its 3C enterprise-context architecture, along with strong client mining. Its top-five clients grew 21.2 per cent YoY, compared with 17.4 per cent growth for its top 100 clients.

Cash conversion and Nagarro integration remain key monitorables, it added.

Mphasis

Mphasis also features among Anand Rathi's top IT picks, with the brokerage citing deal momentum and improving growth visibility.

TCV remained above $400 million for the fifth consecutive quarter, while AI-led deals accounted for around 70 per cent of the pipeline. Management expects Q2 to deliver its strongest sequential constant-currency growth in three years, which Anand Rathi said provides confidence that bookings are beginning to translate into revenue.

The brokerage noted that Mphasis' FY27 growth and margin guidance remains intact, with high-single-digit to low-double-digit CC growth.

Mastek

Anand Rathi described Mastek as a "possible turnaround story", citing a valuation of around 10 times FY29 estimated price-to-earnings and an adjusted FY27-29 earnings per share CAGR of around 10 per cent.

The brokerage pointed to leadership changes in the US and operations and said it expects "green shoots" to emerge. It added that the UK business remains a compounder.

Anand Rathi has assigned a 'Buy' rating to Persistent, Mphasis and Mastek with price targets of Rs 6,931, Rs 2,981 and Rs 2,377, respectively.