- CLSA downgraded TCS, Infosys, and Tech Mahindra to Hold from Outperform due to limited upside
- Wipro and Mphasis ratings cut to Underperform amid AI disruption and macroeconomic uncertainty
- Mid-tier IT firms like Persistent Systems and Coforge receive High Conviction Outperform ratings
Brokerage firm CLSA has downgraded TCS, Infosys and Tech Mahindra to Hold from Outperform, citing limited upside after the recent rerating and a longer gestation period for the benefits from artificial intelligence. It has also turned more negative on Wipro and Mphasis, cutting both to Underperform.
In a latest report, Indian IT stocks face a fresh round of rating downgrades from CLSA as the brokerage flags a mix of AI-driven disruption, macroeconomic uncertainty and weak near-term visibility across the sector. While large IT services companies are seen struggling with structural pressures, CLSA remains bullish on select mid-tier names, creating a clear divide within the space.
Upgrades and Downgrades
The brokerage downgraded Wipro to Underperform from Hold and cut its target price to Rs 152 from Rs 157. Mphasis was also downgraded to Underperform from Hold, with a target price of Rs 2,113.
For the larger IT names, CLSA sees a difficult operating environment as AI-led deflation weighs on legacy managed services, while macroeconomic headwinds continue to cloud technology spending.
It downgraded Infosys to Hold from Outperform, although it raised the target price to Rs 1,147 from Rs 1,109. TCS was also cut to Hold from Outperform, with the target raised to Rs 2,326 from Rs 2,165. Tech Mahindra was downgraded to Hold, with a target price of Rs 1,634.
CLSA's more constructive view is reserved for mid-tier IT companies that it believes are better positioned to benefit from major shifts in technology spending and AI adoption.
Persistent Systems remains a High Conviction Outperform, with CLSA raising its target price to Rs 6,246 from Rs 6,166. Coforge also retains a High Conviction Outperform rating with a target price of Rs 2,170.
The brokerage maintained Outperform on LTIMindtree and Hexaware, while raising their target prices to Rs 5,534 and Rs 730, respectively.
CLSA said the first-quarter earnings season was a mixed bag for Indian IT and global system integrators. However, it expects the technology transition to create potential winners and losers depending on management execution and the ability to adapt. The brokerage expects AI-related volumes to eventually offset the deflationary impact on legacy services, with its basic calculations suggesting this could happen by FY30.
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