TCS, Infosys, HCL Tech, Wipro, LTM, FSol, Birlasoft, Coforge: Fresh target prices for top IT stocks

BoB Capital Markets has retained a cautious stance on Indian IT stocks, saying macro risks and AI-led deflation could keep sector growth subdued at least till FY29. In its note, BoB Capital Markets said the lowering of organic revenue guidance for 2026 by global players makes a growth uptick for Indian IT companies in 2HFY27 highly unlikely, while a slowdown in AI capex is not expected to support IT services spending in the near term.

BoB Capital Markets also said recent stock moves do not point to a broad business recovery. The report said the quarter-to-date outperformance of Nifty IT by about 15.5 per cent over the Nifty is not presaging a material pickup in revenue growth in 2HFY27 or FY28. It added that investors, in their search for growth pockets, are assigning an unsustainable scarcity premium to some Tier-II IT names.

According to BoB Capital Markets, the global macro backdrop has worsened, with rising commodity prices, higher developed market bond yields and resurfacing tariff concerns adding to client anxiety. It said these are the same concerns that had already led to postponement of discretionary projects and delayed ramp-ups in 2025 and the first half of 2026. If these pressures do not ease by the end of 2026, BoB Capital Markets said they could hurt FY28 spending plans as well.

The report said there is also a structural overlay from AI deflation and disruption. BoB Capital Markets said AI deflation risks are likely to persist till at least FY29, with a higher level of deflation expected over the next 18 to 30 months as older contracts come up for renewal.

It said clients are redistributing savings to other players in the IT ecosystem with greater bargaining power. While Business AI has been presented as a major opportunity, the note said AI labs, hyperscalers and new entrants are likely to compete for enterprise technology spending, leaving traditional IT services companies edged out on bargaining power.

BoB Capital Markets said the current debate around slower AI capex does not change its near-term view on IT services spending. It said some market participants believe that after four straight years of weak revenue growth in the low single-digit range in US dollar terms, the sector could return to mid- to high single-digit growth in constant currency or US dollar terms in FY28 and beyond.

BoB Capital Markets disagreed, saying industry growth is unlikely to pick up any time soon and that, at best, some companies may see sharp stock price rebounds driven by optically low valuations, market positioning and FOMO around a supposed turnaround. It is sticking to lower-than-consensus target PE multiples because of much weaker growth and, more importantly, AI disruption risks.

The report said this leaves it with six Sell ratings, six Hold ratings and one Buy. It also said a reverse DCF analysis of Infosys indicates that the current market price implies mid-single-digit free cash flow growth over the next 10 years along with a similar terminal growth rate, which it does not consider conservative enough.

BoB Capital Markets also cautioned against the premium being attached to some Tier-2 companies, noting that today's Tier-1 firms, when they were of a similar size 20 years ago, delivered much faster growth in a more benign demand environment while trading at lower PE multiples. Tier-II players are facing a much more hostile backdrop, reinforcing its expectation of subdued sector growth till FY29, said the brokerage.

From the IT space, BoB Capital Markets has a 'buy' tag only on Firstsource Solutions with a target price of Rs 343. However, it has a 'sell' rating on Birlasoft (Target Price: Rs 252), Coforge (Target Price: Rs 1,236), HCL Tech (Target Price: Rs 1,081), LTM (Target Price: Rs 4,042), Persistent Systems (Target Price: Rs 3,510), TCS (Target Price: Rs 2,002).

It has a 'hold' rating ascribed on Eclerx (Target Price: Rs 1,855), Infosys (Target Price: Rs 1,150), Mphasis (Target Price: Rs 2,246), Tech Mahidnra (Target Price: Rs 1,625), Wipro (Target Price: Rs 178) and Zensar Technologies (Target Price: Rs 427).