IT: Tech Mahindra Upgraded To Buy, Infosys Downgraded To Neutral Among Others By Motilal Oswal — Here's Why

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Motilal Oswal Report

We have argued earlier that discretionary spending could see a revival in select pockets like US Banking, Healthcare, and Hi-Tech, driven by three key factors:

1. the beginning of a rate cut cycle,

2. a business-friendly administration, and

3. the start of pre-GenAI spending.

Six months on, the landscape has shifted. The probability of US rate cuts has diminished, and heightened geopolitical/tariff risks are weighing on short-term stability for US and European enterprises.

Sentiment has turned cautious from January to March, with enterprises adopting a "wait-and-watch" approach. While GenAI adoption is progressing, it is not yet moving the needle for IT services revenues.

The focus has yet to shift away from capex, and clients are still not prioritizing services spending. This evolving backdrop makes forecasting discretionary spending in FY26 uncertain, and meaningful improvement over FY25 is no longer a given.

In this environment, we prioritize correct positioning over predictability, favoring bottom up transformation and margin-driven stories over top-down discretionary names.

We reposition our ratings to reflect this: we downgrade Infosys to Neutral and Wipro to Sell, while we upgrade TechMahindra to Buy. LTIMindtree and TCS remain preferred picks for their risk-reward balance, whereas HCLTech’s all-weather portfolio makes it relatively resilient.

We also trim our growth estimates and reduce target multiples by 15%. Among midcaps, we retain our preference for growth-oriented mid-tier names, Coforge and Persistent, and see the recent correction as an opportunity to buy.

We downgrade L&T Technology Services to Neutral due to valuation discomfort.

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