Whalesbook
The Shifting Tides in IT Leadership
Once the undisputed leaders of India's technology sector, Infosys and Tata Consultancy Services (TCS) are now consistently underperforming the broader Nifty IT index. This marks a significant departure from their previous dominance, where their quarterly results were eagerly awaited and heavily discussed. Mid-cap players such as Persistent Systems and Coforge have begun to show improved performance, catching up with the larger entities as the sector index peaked around December 2024.
Valuation Disparities Emerge
Analysis of Price-to-Earnings (PE) ratios reveals a striking divergence. While major stocks like Infosys saw their PE drop by 43.5% (from 39x in 2021 to 22x in 2025) and TCS by 45% (from 40x to 22x), mid-cap names like Persistent Systems maintained their valuation at 60x. Coforge experienced a milder reduction of 11.7% (from 68x to 50x). This suggests the market is now pricing greater growth prospects into mid-cap IT firms, while valuing the established leaders less generously than in previous years.
Institutional Holdings Diverge
Foreign institutional investors (FIIs) have been steadily reducing their stakes across most IT names, with the exception of mid-caps like Persistent and Coforge where holdings have been more stable or increased. Domestic institutional investors (DIIs), conversely, have maintained or increased their positions. DIIs have absorbed significant selling pressure from FIIs, effectively turning the IT sector into a defensive play supported by consistent domestic buying, high dividend payouts, and stock buybacks.
Coforge Faces Technical Hurdles
An outlier in the mid-cap space is Coforge, where both FII and DII holdings have surged to approximately 90% institutional ownership after a major stake sale by holder Hulst BV. This concentration of ownership, coupled with a recent fund-raising announcement, has put pressure on the stock. Risks related to potential dilution, weaker cash conversion guidance, and sky-high expectations due to its previous high valuation have created a precarious technical setup. Charts indicate a potential distribution pattern, a broken support trendline, and bearish oscillators, making its upcoming results on January 22 critical for holders.