CLSA has downgraded TCS, Infosys and Tech Mahindra to “hold” from their previous rating of “outperform”, while Wipro and Mphasis have been downgraded to “underperform” from their earlier rating of “hold”.
While ratings for these five stocks have been changed, their price targets have only seen minor tweaks or have been left unchanged.
| Stock | Rating | Old Target (₹) | New Target (₹) |
| TCS | Hold From Outperform | 2,165 | 2,326 |
| Infosys | Hold From Outperform | 1,109 | 1,147 |
| Tech Mahindra | Hold From Outperform | 1,634 | UNCH |
| Wipro | Underperform from Hold | 157 | 152 |
| Mphasis | Underperform from Hold | 2,113 | UNCH |
| Persistent Systems | High Conviction Outperform | 6,166 | 6,246 |
| Coforge | High Conviction Outperform | 2,170 | UNCH |
| Hexware | Outperform | 727 | 730 |
| LTM | Outperform | 4,570 | 5,534 |
In its note, CLSA highlighted that the ongoing technology changes are creating both potential winners and losers, adding that three structural changes continue to weigh on Indian IT, such as GCC, no market share gain over global peers, and services losing out to hardware and software in the global AI rollout.The brokerage said that larger IT service firms remain in a tougher spot, as they face the AI deflation impact, a drag on legacy managed services, along with macro headwinds. The AI volumes that these companies are currently generating, could supersede the AI deflation impact only by financial year 2030.
“This means that there will be a long gestation period before we move from low to mid-single-digit revenue growth,” CLSA wrote in its note.
Citing those as the reasons behind their downgrade of the larger IT names, CLSA said that mid-tier IT vendors are better positioned compared to their largecap peers, and therefore, it has maintained its “high-conviction outperform” rating on Coforge and Persistent Systems, and an “outperform” rating on Hexaware Technologies and LTM.
For TCS, Infosys and HCLTech, CLSA expects AI to become one-third of their overall revenue only by financial year 2031, a figure which currently stands at 10%, 9%, 6% respectively for these three companies. It is only then, that they will be able to deliver 6.1%, 5.6% and 6.4% growth respectively during financial year 2031, the brokerage added.
| Stock | FY27 AI Revenue (%) | FY31 AI Revenue Est. (%) | FY27 Growth (%) | FY31 Growth Est. (%) |
| TCS | 10 | 33 | 2.5 | 6.1 |
| Infosys | 9 | 32 | 1.9 | 5.6 |
| HCLTech | 6 | 31 | 2.8 | 6.4 |
Despite a recovery from 52-week lows in July, the Nifty IT index is still down 20% so far this year, with stocks like TCS, Infosys and Wipro having declined between 28% to 33% so far this year. Tech Mahindra, Coforge and Oracle Financial are the only three Nifty IT stocks that are positive for the year so far.
