Wipro, Infosys and Birlasoft shares jumped more than 3% on Wednesday, leading gains among IT stocks, as the sector rallied amid Jefferies' assessment that select companies offer scope for a valuation re-rating. Wipro rose 3.51%, Birlasoft gained 3.18% and Infosys advanced 3.14%, while Newgen Software and Tata Consultancy Services climbed 2.28% each, according to the market data provided.
Jefferies sees re-rating potential in large-cap IT stocks, including Infosys and Tata Consultancy Services, as well as mid-cap companies such as Coforge and Sagility. The brokerage has raised target prices for large-cap IT stocks by 14–18%, while retaining Hold and Underperform ratings on Infosys and TCS, respectively. It remains selective, citing uncertainty around sector growth and global artificial intelligence spending.
Infosys, TCS Among Large-Cap IT Stocks In Focus
Jefferies said the correction in IT stocks and changes in investor expectations have created opportunities for a selective recovery. However, it cautioned that weaker sentiment towards global AI capital expenditure could trigger further cuts in valuation multiples.
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The brokerage said a re-rating of large-cap IT stocks would depend on improving sentiment towards long-term growth and the potential for earnings upgrades. Expectations for FY27 and FY28 could weaken if companies fail to deliver the growth investors anticipate.
READ | Infosys, TCS Only Large-Cap IT Stocks With Re-Rating Potential: Jefferies
Coforge, Sagility Offer Selective Mid-Cap Upside
Jefferies sees opportunities among mid-cap IT companies, including Coforge and Sagility, where growth prospects and valuations could support a re-rating.
The brokerage said most mid-cap IT stocks are trading at 12–14 times estimated FY27 price-to-earnings multiples, while a few trade at 14–22 times. The extent of any re-rating will depend on companies' earnings prospects.
Sagility stands out in Jefferies' assessment, with the brokerage citing potential for a re-rating of more than 50% in its best-case scenario. It also sees scope for a re-rating in Coforge, where growth expectations could support a higher valuation.
AI Spending Risks
Jefferies warned that a worsening outlook for global AI capital expenditure could weigh on valuations across the IT sector, particularly for companies whose share prices reflect expectations of stronger growth.
The brokerage also cautioned that investors could reassess the multiples they are willing to pay if IT companies fail to deliver the growth expected in FY27 and FY28.
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