Motilal Oswal projects in Q2 margins are expected to remain range-bound for most players, with TCS, HCLTech, Wipro, and LTIMindtree expected to see sequential improvement, supported by the reversal of wage hike impacts and cost measures, along with usual Q2 seasonality in the case of HCLTech. Infosys and Tech Mahindra are expected to remain broadly flat.
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Motilal Oswal Report
According to the domestic brokerage firm Motilal Oswal, Q2 FY27 results are likely to mirror the tepid macro environment, with QoQ constant currency growth expected in the range of -0.5% to 3.0% for large-caps. Mid-caps are expected to outperform once again, with growth ranging from 0.0% to 12.0%, led by continued large-deal ramp-ups and inorganic contribution in some cases.
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For the brokerage's coverage universe, it expects aggregate revenue/EBIT/PAT to grow 12.8%/13.6%/13.4% YoY (all in INR terms), respectively.
Margins are expected to remain range-bound for most players, with TCS, HCLTech, Wipro, and LTIMindtree expected to see sequential improvement, supported by the reversal of wage hike impacts and cost measures, along with usual Q2 seasonality in the case of HCLTech.
Infosys and Tech Mahindra are expected to remain broadly flat. Persistent Systems is expected to see margin contraction following wage hikes, while Mphasis, Hexaware, and Zensar Technologies are expected to see moderate expansion as companies continue to invest in growth, capabilities, and AI. Coforge is expected to remain flat due to residual Encora integration costs.
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Across the sector, BFSI is expected to remain the key growth driver, supported by steady deal conversion and resilient spending, with Hi-Tech also expected to remain stable, says the brokerage. HLS, Aerospace, and E&U are expected to see selective growth, supported by deal execution and AI-led engineering.
Consumer, telecom, and travel and transportation are expected to remain under pressure, with discretionary spending weakness continuing to weigh on demand.
Despite the meaningful correction in valuations, Motilal Oswal believes a sustained rerating will require evidence that demand is improving, revenue growth is accelerating, and companies can demonstrate that AI-led opportunities are beginning to offset productivity-related headwinds.
The brokerage continues to prefer bottom-up ideas with better earnings visibility and execution.
HCLTech and Tech Mahindra in large-caps and Coforge in mid-caps are Motilal Oswal's preferred picks.
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