Global brokerage CLSA has reiterated its bullish stance on Indian IT stocks, with Persistent Systems and Coforge emerging as its top ‘High Conviction Outperform' picks. The brokerage has set target prices of Rs 8,058 for Persistent and Rs 2,278 for Coforge, implying sharp upside potential from current levels.
Among large-cap names, CLSA maintains ‘Outperform' ratings on Infosys (Rs 1,653), Tech Mahindra (Rs 1,698), TCS (Rs 3,333) and LTIMindtree (Rs 6,304), while keeping a more cautious ‘Hold' stance on Wipro (Rs 218) and HCLTech (Rs 1,506).
The brokerage's preference reflects stronger earnings visibility and growth momentum in select mid-cap IT names compared to their larger peers.
Indian IT stocks are seeing broad-based gains today, with all major constituents of the Nifty IT index trading in the green. The index, which has been under pressure over the past month—falling nearly 9.5%—witnessed strong buying interest, signalling a potential near-term recovery.
Mid-cap names led the rally, with Coforge emerging as the top gainer, rising over 6%, followed by Oracle Financial Services and Persistent Systems, which gained between 5–5.5%. Among large-caps, Infosys, HCLTech, Tech Mahindra and TCS posted gains of around 3–4%, while Wipro lagged slightly but remained in positive territory.
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Why CLSA Is Positive on IT Stocks
From a stock perspective, CLSA notes that BFSI continues to anchor revenue visibility, supporting large-cap names like TCS and Infosys. However, weakness persists in retail, auto and healthcare verticals, which could weigh on near-term earnings upgrades.
A key overhang for IT stocks—AI-led pricing pressure—appears to be easing. CLSA noted that discussions with major IT firms showed no evidence of pricing deflation in renewal contracts, despite the rapid rollout of AI tools.
Additionally, the brokerage highlighted that deal pipelines remain strong, supporting medium-term revenue visibility.
Valuations and Correction Support Upside
On the geopolitical front, CLSA highlighted that direct exposure to the Middle East remains in low single digits for most Indian IT firms. This limits immediate earnings risk, although prolonged tensions could indirectly impact global tech spending cycles.
The recent correction in IT stocks—reflected in the nearly 9.5% drop in the Nifty IT index over the past month—has brought valuations closer to their 10-year averages. CLSA believes this creates a favourable risk-reward setup for investors.
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