TCS, Infosys, HCL Tech, Wipro, Coforge, Mphasis, TechM: IT stocks to buy— Fresh targets

Indian IT stocks hogged spotlight on Tuesday with the index rising nearly 5 per cent, bucking the weakness in the broader markets. Bluest of the blue IT counters like Infosys Ltd and Tata Consultancy Services Ltd (TCS) led the gainers, rising nearly 7 per cent in the early trade. Smallcap IT stocks like Birlasoft Ltd, Quick Heal and other gains up to 10 per cent.

Indian IT companies delivered a stable Q4FY26, but the gap between large-cap and mid-cap performance widened, according to Choice Institutional Equities. Choice said Tier-1 IT companies reported subdued growth, while mid-tier firms continued to outperform on stronger execution, market-share gains and healthy deal conversion.

Large-cap revenue growth moderated to -0.5 per cent quarter-on-quarter (QoQ) in constant currency from 1.7 per cent in Q3, amid seasonal weakness, telecom softness and delayed deal ramp-ups. Choice said TCS and Tech Mahindra Ltd were relatively more resilient, posting 1.2 per cent and 0.6 per cent QoQ growth respectively, while Infosys declined 1.3 per cent and HCL Technologies Ltd fell 3.3 per cent because of seasonal softness, telecom spending cuts and deal deferrals.

The brokerage said this divergence is likely to continue in the near term, with mid-tier players better placed to benefit from AI, cloud and transformation spending, while Tier-1 growth remains constrained by slower discretionary demand and productivity-led revenue pressure.

Choice said deal momentum remained resilient despite a seasonally weak quarter. Tier-1 aggregate TCV fell 4.1 per cent year-on-year (YoY), though it rose 0.6 per cent sequentially. TCS led with strong mega-deal wins, while Infosys and HCLTech saw moderation due to elongated decision cycles and delayed ramp-ups.

Choice said large transformation demand remains intact, supporting a healthy medium-term pipeline. Among Tier-2 companies, Coforge Ltd continued to outperform with strong executable order-book growth, and healthy deal activity is seen improving FY27E growth visibility for consistent deal winners even as near-term revenue conversion remains uneven.

Margins were mixed in Q4FY26 despite a supportive currency backdrop, Choice said. TCS and Tech Mahindra expanded margins through operational efficiency and cost optimisation, while HCLTech faced pressure from software seasonality, wage hikes and restructuring cost.

Among mid-caps, Coforge stood out with strong margin expansion. Choice said AI-led productivity gains and rupee depreciation are increasingly being reinvested in capability building, go-to-market expansion and workforce upskilling, which is limiting near-term margin upside. The Nifty IT Index has fallen about 25 per cent so far this year, and the focus has shifted from demand recovery to AI monetisation.

The brokerage said early AI adoption remains structurally deflationary as productivity gains compress traditional effort-based revenues before meaningful AI-led revenue scale-up. It said sector re-rating will depend on clear evidence of AI monetisation, better revenue conversion and sustained market-share gains.

Within Tier-1, Choice prefers Infosys and Tech Mahindra, while among mid-caps it prefers Persistent Systems and said Coforge offers stronger growth visibility backed by deal momentum. It has given an 'add' rating to LTM (Target Price: Rs 4,700), Wipro Ltd (Target Price: Rs 215) and HCL Technologies (Target Price: Rs 1,500).

On the other hand, brokerage has a 'buy' rating on TCS (Target Price: Rs 3,550), Infosys (Target Price: Rs 1,500), Tech Mahindra (Target Price: Rs 1,700), Persistent Systems (Target Price: Rs 6,200), Coforge (Target Price: Rs 1,900), Mphasis (Target Price: Rs 2,625), Zensar Technologies (Target Price: Rs 650) and Happiest Minds (Target Price: Rs 560).