Top IT Picks: LTIMindtree, Coforge Shine As Motilal Oswal's Preferred Stocks

Motilal Oswal Financial Services has identified LTIMindtree Ltd. and Coforge Ltd. as its top picks in the IT sector, citing their strong deal pipelines, focus on high-margin verticals, and potential to outperform peers in a challenging environment.

As of 11:23 a.m., LTIMindtree is trading 0.69% lower at Rs 5,604.65 per share, and Coforge is trading 2.31% lower at Rs 9.591.15 per share, as compared to a 0.24% decline in the benchmark NSE Nifty 50.

The brokerage has a 'buy' call on Coforge with a target price of Rs 11,500, indicating a 17% upside potential. It has a similar rating on LTIM, with a target price of Rs 8,000 that implies a 42% growth potential.

Despite sector-wide pressures, these mid-cap stars are poised to deliver resilient growth, making them standout bets for long-term investors, says the brokerage.

Motilal Oswal notes that Indian IT companies are steadily adapting, focusing on cost optimisation, digital transformation, and tapping emerging markets to sustain growth.

Post-merger, LTIMindtree has become a formidable player in the IT sector with a diversified portfolio and expertise in digital and cloud solutions, said Motilal Oswal. Here are the strengths listed out by the brokerage:

Vertical Edge: The company has a strong presence in BFSI, retail, and manufacturing, which are seeing increased tech adoption.

Outlook: With a robust order pipeline and operational synergies post-merger, LTIMindtree is set for margin improvement and revenue acceleration.

Valuation: While trading at a slight premium to its historical averages, the growth prospects justify its current levels, according to Motilal Oswal.

Coforge's deep expertise in high-margin verticals like insurance and travel gives it a competitive edge in client retention and new deal wins, said the brokerage.

Coforge is expected to see continued momentum from large deal wins, particularly in North America and Europe. With a compelling risk-reward profile, Coforge offers a mix of growth and reasonable valuations, positioning it as an attractive mid-cap bet, they add.

Motilal Oswal remains cautious about broader IT sector dynamics:

• Global economic uncertainty may further delay large-scale IT investments.

• Margin pressures due to high wage costs and slower revenue growth remain a concern.

• Currency fluctuations, particularly a stronger rupee, could impact export-driven revenues.

The brokerage, however, remains bullish and has buy calls on Cyient, HCL Technologies, Infosys, L&T Technology Services, Persistent Systems, and Tata Consultancy Services.

Motilal Oswal believes these companies are well-placed to outperform the sector, backed by strong fundamentals and focused strategies.