Kamal Ghorui
Indian IT stocks rebound! Shares of major IT firms including Infosys, TCS and HCL Tech climbed by as much as 4%, supported by global brokerage CLSA reaffirming its ‘Outperform’ stance on key stocks. This came despite ongoing concerns around disruption driven by artificial intelligence, which had led to a sharp correction in the sector.Among individual stocks, Coforge and Persistent Systems surged more than 4% each. TCS, the country’s largest software exporter, advanced around 3%, while LTIMindtree also posted gains of over 3%. HCL Tech and Tech Mahindra rose over 2.5%, and Wipro recorded gains of more than 2%.CLSA identified Persistent Systems and Coforge as its top high-conviction bets. It continues to rate Infosys, Tech Mahindra, TCS and LTIMindtree as ‘Outperform’, while maintaining a ‘Hold’ recommendation on HCL Tech and Wipro, according to a CNBC-TV18 report.The brokerage noted that it does not currently observe any pricing pressure linked to AI in contract renewals for IT services firms. However, it flagged some delays in client decision-making, partly due to shifts related to AI adoption and the ongoing West Asia conflict.While direct business exposure to West Asia remains limited, CLSA cautioned that the broader macroeconomic implications are still unclear. Even so, it highlighted that deal pipelines remain robust and valuations in the sector are close to their decade-long averages, which continue to make them appealing.CLSA is the most recent brokerage to express a positive outlook on the sector. Earlier, Nuvama Institutional Equities had advised investors to accumulate all top 10 IT stocks. The domestic brokerage noted that the Indian IT industry is once again at a critical juncture, where a new technological shift – this time generative AI – is being viewed as a potential threat to the offshore services model, similar to concerns seen during the Y2K phase, the rise of remote infrastructure management, and the digital transformation wave between 2015 and 2018.In this context, Nuvama has issued a “Buy” recommendation across the top 10 IT services companies – TCS, Infosys, HCL Tech, Wipro, Tech Mahindra, LTIMindtree, Coforge, Persistent, Mphasis and Hexaware. While it has slightly lowered valuation multiples to account for risks linked to generative AI, it still projects potential upside in the range of 14% to 84% over the next 12 to 15 months. The brokerage continues to favour Coforge, LTIMindtree, Persistent, Mphasis, Infosys and TCS, with Coforge identified as its top pick. It believes investors could generate strong returns across these stocks from current levels, as the industry transitions from short-term revenue pressures caused by AI to a significantly larger opportunity in AI services, estimated at $300–400 billion by 2030.IT stocks are expected to remain in focus this week as market participants await the outcome of the US Federal Reserve’s FOMC meeting, which could shape sentiment given the sector’s heavy reliance on US revenues. At present, markets are largely factoring in that interest rates will remain unchanged within the 3.5%–3.75% range.Earlier this year, Indian IT stocks witnessed a sharp correction following Anthropic’s launch of plug-ins for its Claude Cowork agent, capable of automating tasks across areas such as legal, sales, marketing and data analytics. This development raised concerns among some analysts about the potential need for IT firms to gradually reduce workforce sizes as more cost-efficient and faster AI solutions gain traction.(Disclaimer: Recommendations and views on the stock market, other asset classes or personal finance management tips given by experts are their own. These opinions do not represent the views of The Times of India)
