US-China, US-UK Trade Deals Boost Indian IT Outlook; Infosys, TCS, Persistent Among Top Analysts' Picks

Analysts see strong medium-term growth prospects for Indian IT companies as the United States advances trade negotiations with major partners. They named Infosys Ltd., Tata Consultancy Services Ltd., and Persistent Systems Ltd. among their top picks.

On Monday, the US and China agreed to reduce tariffs after a month of steep increases. US tariffs on Chinese goods fell to 30% from 145%, while China's tariffs on US goods dropped to 10% from 125%. The countries agreed to keep the lower tariff levels for 90 days. The development followed a trade agreement between the US and the UK earlier this month.

Right after US announced the terms to reduce tariffs on China, the NSE Nifty IT jumped 6.90% to 38,356.10, the highest level since March 5.

The IT index is trading at 25 times price-to-earning ratio, in line with five-year average and above, Jefferies said. As there's a wide difference in growth of firms in the IT sector, the brokerage suggests a bottom-up approach. Infosys Ltd., Coforge Ltd., and Sagility India Ltd. are Jefferies' top picks.

Following these developments CLSA increased weightage of IT companies in its portfolio. The brokerage raised the rating on IT sector to 'overweight' from 'underweight', it said in the latest India Strategy Note.

Despite progress on trade talks, UBS Global Research expects near-term demand weakness for IT services. The brokerage said tariff negotiations between the US and key trading partners could take longer than expected. It does not expect any risk to consensus earnings estimates but warned that valuation multiples may face downward pressure.

UBS Global Research said Indian IT stocks may pare recent gains due to multiple compression amid a weaker macroeconomic environment. “We still believe Indian IT will gain from cost take-out deals, a higher outsourcing trend and vendor consolidation,” it said. UBS named Tata Consultancy Services Ltd., Infosys Ltd., and HCLTech Ltd. as preferred picks and said any major correction would offer buying opportunities in large caps.

Macquarie said the US-UK trade deal and progress in US-China talks support its view that Indian IT companies are unlikely to see a sharp slowdown in calendar year 2025. Indian IT managements earlier flagged a growth slowdown in the second half of 2025 due to tariff uncertainty.

Macquarie expects a multi-year technology refresh driven by hardware changes. “That will mean that we are in a multi-year super cycle of spending the first since the 2000s when we saw the adoption of web technologies,” it said. The brokerage prefers Tata Consultancy Services Ltd. and HCLTech Ltd. among large-caps and also favours Persistent Systems Ltd. and L&T Technology Services Ltd.