IT Sector Outlook: Major IT companies are set to begin reporting their Q4 FY26 results, with Tata Consultancy Services (TCS) expected to announce its numbers on April 9. The upcoming earnings assume greater significance following the recent correction in the sector, driven by concerns that artificial intelligence (AI) could disrupt traditional IT outsourcing models by reducing demand for manual coding and maintenance.
Despite these concerns, global brokerage CLSA has reiterated its constructive stance on the Indian IT services sector. It noted that the emergence of advanced AI tools from companies such as Anthropic and OpenAI has not yet resulted in pricing pressure.
According to CLSA, there is no evidence of increased deflation in renewal contracts, alleviating fears that AI-led efficiencies could compress margins for IT service providers.
Demand trends remain resilient
CLSA highlighted that demand across key industry verticals remains largely stable. The Banking, Financial Services, and Insurance (BFSI) segment continues to act as a key growth driver, with sustained tailwinds across major IT companies.
Within the technology vertical, HCLTech and Tata Consultancy Services (TCS) are witnessing robust demand.
AI impact is limited to execution delays
While AI has not impacted pricing, some companies have reported minor delays in client decision-making. This is leading to temporary pauses in deal closures rather than outright cancellations.
CLSA also assessed the potential impact of geopolitical tensions in the Middle East and concluded that direct exposure for major Indian IT firms remains limited.
Strong pipeline underpins growth outlook
The brokerage underscored that the sector’s deal pipeline remains strong, supporting confidence in revenue growth.
Valuations Attractive; Key Picks Identified
CLSA believes current valuations in the Indian IT sector are attractive, offering a compelling entry point for investors.
| Company | Rating | Target Price (Rs) | Upside |
| Persistent Systems | High Conviction Outperform | 8,058 | 78% |
| Coforge | High Conviction Outperform | 2,278 | 113% |
| Infosys | Outperform | 1,653 | 34% |
| Tech Mahindra | Outperform | 1,698 | 26% |
| Tata Consultancy Services (TCS) | Outperform | 3,333 | 40% |
| LTIMindtree | Outperform | 6,304 | 50% |
| HCLTech | Hold | 1,506 | 14% |
| Wipro | Hold | 218 | 14% |
CLSA’s ratings reflect a strong bullish bias on mid-tier IT firms, with Persistent Systems and Coforge offering the highest upside, indicating confidence in their growth potential. Large-cap players like Infosys and TCS show moderate upside, suggesting stability. Hold ratings on HCLTech and Wipro imply limited near-term growth relative to peers.
Kotak flags near-term weakness
However, Kotak Institutional Equities presents a more cautious view. The brokerage expects the IT services sector to deliver a subdued performance in the fourth quarter of FY26, with weak sequential growth amid ongoing macroeconomic headwinds.
Industry growth is projected in the range of 3–5 per cent, reflecting persistent geopolitical uncertainties and structural shifts within the sector.
Kotak Institutional Equities also anticipates a mixed Q4 FY26 performance across Tier-1 IT companies.
| Company | QoQ CC Growth | YoY CC Growth |
| TCS | ~ 0.8–1.2% | ~ 0% |
| Infosys | ~ -1.0% | ~ 4–5% |
| HCL Tech | ~ -1.7% | ~ 4.4% |
| Wipro | ~ -0.7% (organic) | ~ 0.9% |
| Tech Mahindra | ~ 0% | ~ 2.1% |
TCS remains marginally positive, while Infosys, HCL Tech, and Wipro decline. Year-on-year trends indicate a modest recovery, led by Infosys and HCL Tech, while other companies remain subdued.
(Disclaimer: The above article is meant for informational purposes only, and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money-related decisions.)
