- Citi Research cut target prices for India IT stocks by 14-29% citing valuation and growth changes
- Infosys target lowered to Rs 1,440, TCS to Rs 2,500, and HCL Technologies to Rs 1,460
- Nifty IT index fell 19% YTD, underperforming the broader Nifty index
Citi Research has lowered target prices across its India IT coverage by 14-29%, citing changes in valuation multiples and terminal growth assumptions, while maintaining a cautious stance on the sector.
The brokerage cut its target price on Infosys to Rs 1,440 from Rs 1,700. TCS saw its target reduced to Rs 2,500 from Rs 3,020, while HCL Technologies was lowered to Rs 1,460 from Rs 1,700.
Among midcaps, LTIMindtree's target was cut to Rs 4,190 from Rs 5,415. Persistent Systems saw one of the sharper reductions, with its target trimmed to Rs 4,170 from Rs 5,455. Coforge was lowered to Rs 1,100 from Rs 1,560.
Citi also reduced Tech Mahindra's target to Rs 1,260 from Rs 1,500, Wipro's to Rs 185 from Rs 235, and Hexaware's to Rs 475 from Rs 625. Mphasis was cut to Rs 2,335 from Rs 2,905.
The brokerage noted that the Nifty IT index has fallen roughly 19% calendar year-to-date, underperforming the broader Nifty.
AI Optimism Meets Growth Concerns
Citi said a key investor debate remains whether enterprises will increase IT spending to support artificial intelligence implementation.
While acknowledging that AI-related services could benefit the sector, the brokerage said near-term revenue growth remains challenging. Execution cycles in discretionary "build" projects have lengthened, delivery productivity gains are affecting margin trajectories, and industry fragmentation continues to weigh on demand visibility.
Citi said that while IT services remain strategically relevant, stock returns will ultimately depend on growth and margin assumptions over the medium term. Revisions to terminal growth expectations and valuation multiples drove much of the target price adjustments.
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Valuations Moderate After Correction
Following the recent sell-off, valuations have eased. Nifty IT forward price-to-earnings multiples have moderated to around 25-26x, compared with 30-31x earlier in the year.
However, Citi said medium- and long-term growth assumptions have been recalibrated higher for risk, suggesting valuation comfort alone may not be sufficient. The brokerage said it would prefer more attractive entry levels.
Citi highlighted that Indian IT stocks trade at a narrower discount to global peers. While domestic institutional ownership and relatively limited direct AI displacement risks offer support, the brokerage said a sizable premium may be difficult to sustain if growth slows.
Despite the broad-based target cuts, Citi said it continues to rank Infosys and HCL Technologies relatively higher within its coverage, while remaining cautious on the overall sector outlook.
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