Jefferies Sees Up to 32% Upside in 11 Indian IT Stocks; Mid-Caps Lead

TECH
Whalesbook Logo
AuthorRiya Kapoor|Published at:
Jefferies Sees Up to 32% Upside in 11 Indian IT Stocks; Mid-Caps Lead
Overview

Jefferies maintains a selective outlook for Indian IT services heading into 2026, predicting modest revenue growth. The brokerage favors mid-sized firms over large caps for superior earnings potential. Amid geopolitical risks and AI's impact, Jefferies highlights stocks like Coforge and Sagility for significant upside, while cautioning on Wipro and Tech Mahindra.

Jefferies Flags Select Indian IT Stocks

Jefferies issued a cautious yet specific forecast for India's IT services sector, anticipating a modest 4.7% year-over-year revenue growth for FY27. The brokerage firm highlighted a distinct preference for mid-sized companies, citing their superior potential for earnings expansion compared to larger peers.

Sector Headwinds and Opportunities

The industry faces a complex environment. While the U.S. economic outlook shows improvement, geopolitical tensions and the revenue-deflationary impact of AI pose challenges. Clients are also shifting budgets towards hardware investments, adding pressure on IT service providers.

Top Picks and Upside Potential

Jefferies identified eleven stocks with significant upside potential. Among large caps, Infosys Ltd. and HCL Technologies Ltd. received 'Buy' ratings, positioned as recovery plays with strong deal pipelines. Infosys is projected to lead revenue CAGR (5.0%) over FY26-28 among top firms, while HCL Technologies is expected to outperform peers in earnings growth.

Mid-cap firm Coforge Ltd. is a high-conviction pick, with Jefferies targeting a 32% upside and a price of ₹2,180, driven by financial services recovery and acquisitions. Sagility Ltd. also offers a projected 32% upside, targeting ₹70, due to its niche focus on U.S. healthcare insurance.

MphasiS Ltd. is viewed as a prime recovery play in the BFSI sector, with a target price of ₹3,460 and a 23% upside. Inventurus Knowledge Solutions Ltd. (IKS) was upgraded to 'Buy', with the highest EPS growth forecast and a target of ₹2,010, representing a 19% upside.

Stocks Facing Headwinds

Tata Consultancy Services Ltd. and LTIMindtree Ltd. were assigned 'Hold' ratings. TCS faces headwinds from a ramp-down in a major deal and a slower EPS CAGR, while LTIMindtree's growth remains muted relative to its premium valuation.

Hexaware Technologies Ltd. was downgraded to 'Hold' due to client pressures and reliance on H1B visas. Wipro Ltd. and Tech Mahindra Ltd. received 'Underperform' ratings, facing the lowest organic growth projections and significant vertical concentration risks, respectively.

Investor Strategy

The Jefferies report signals a widening performance divergence within the Indian IT sector. Investors are advised to focus on companies with robust organic growth and specialized domain expertise, moving beyond historical momentum towards precise stock selection.

Disclaimer:This content is for educational and informational purposes only and does not constitute investment, financial, or trading advice, nor a recommendation to buy or sell any securities. Readers should consult a SEBI-registered advisor before making investment decisions, as markets involve risk and past performance does not guarantee future results. The publisher and authors accept no liability for any losses. Some content may be AI-generated and may contain errors; accuracy and completeness are not guaranteed. Views expressed do not reflect the publication’s editorial stance.