TCS, Infosys, HCL Tech, TechM, Wipro, LTM: Top-6 IT stocks get 'sell' tag; KPIT only 'buy'

Indian IT stocks may remain in focus as revenue growth pressure is expected across the sector, according to Nirmal Bang Institutional Equities. Nirmal Bang said Tier-I players are likely to report -1.2 per cent to 1.8 per cent quarter-on-quarter constant currency revenue growth, while Tier-II players may post 1.1 per cent to 2.8 per cent growth, aided by strong total contract value growth across the mid-cap companies it tracks.

Nirmal Bang said cloud migration, AI-driven deals and large-scale transformation contracts are supporting growth, although this is being offset by weakness in telecom, hi-tech, and travel and hospitality. It added that ER&D players are expected to see a better recovery, with 1 per cent to 2.3 per cent quarter-on-quarter constant currency revenue growth, helped by resumed spending by global OEMs, a recovery in the auto business, and continued momentum in aerospace and defence.

On margins, Nirmal Bang said the sector is likely to see overall stability and some recovery because of the reversal of pending furlough impact and a shift towards outcome-based projects. It said productivity gains have become central to most deal signings. At the same time, it flagged higher sub-contractor costs and investments to make organisations AI-ready as headwinds.

Nirmal Bang added that most players have been running margin expansion programmes and maintaining tight cost controls, which should support operational efficiency.

Nirmal Bang said total contract value is likely to remain range-bound for the industry as there were no mega deal signings across the board in the first quarter. It expects TCV to be skewed towards large deals, while smaller deal volumes may pick up as short-duration AI-related contracts come to the table for most players.

The brokerage said key areas to watch include whether incremental spending is improving or worsening, updates on client budgets, the state of discretionary spending, and demand trends in BFSI, hi-tech, manufacturing and healthcare. It also flagged FY27 growth and margin expectations after a subpar FY26, the pace of Gen AI scale-up, how companies will fund Gen AI spending, commentary on workforce downsising, acquisitions, capital allocation, the direct and indirect impact of the Middle-East conflict, pricing pressure, competitive intensity, management views after Accenture cut guidance, commercial and pricing model changes, visa-led shifts in service delivery and offshoring, and whether the TCV-to-revenue conversion issue continues.

Overall, Nirmal Bang expects a mixed quarter for Indian IT, marked by pressure on revenue growth, stable to improving margins, range-bound TCV, and close tracking of spending trends, Gen AI adoption, vertical demand and pricing conditions.

Nirmal Bang has a 'sell' rating on all top six IT stocks including TCS (Target Price: Rs 1,693), Infosys (Target Price: Rs 1,051), HCL Technologies (Target Price: Rs 871), Wipro (Target Price: Rs 152), Tech Mahindra (Target Price: Rs 1,120), LTM (Target Price: Rs 3,185). KPIT Technologies is the only IT stock to get a 'buy' call from Nirmal Bang with a target price of 900.

Other IT stocks including Persistent Systems (Target Price: Rs 5,315), Coforge (Target Price: Rs 1,395), Mphasis (Target Price: Rs 2,347), Birlasoft (Target Price: Rs 363), Zensar Technologies (Target Price: Rs 613), Tata Elxsi (Target Price: Rs 4,837) and Tata Technologies (Target Price: Rs 665) have a 'hold' rating from the brokerage firm.