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Nirmal Bang Report
Domestic brokerage firm Nirmal Bang has turned cautious on the Indian IT sector, maintaining an ‘underweight' stance for FY27 amid rising structural challenges driven by Gen AI-led pressures.
In its latest sector note themed ‘Cornered on 2 fronts', the brokerage highlighted that IT companies are facing dual headwinds, leading to weaker growth visibility and margin risks. The firm believes that Gen AI is exerting pressure both on demand as well as pricing, thereby impacting the sector's medium-term outlook.
Reflecting this cautious stance, Nirmal Bang has issued a series of downgrades across large- and mid-cap IT stocks, with most names now falling under the ‘Sell' category.
Among large caps, TCS has been downgraded to ‘Sell' from ‘Buy', with a sharply reduced target price of Rs 1,693 (earlier Rs 3,046), implying a lower valuation multiple of 12x FY28E EPS versus 19x earlier.
Similarly, Infosys has been cut to ‘Sell', with the target price lowered to Rs 1,051 (from Rs 1,610), while HCL Technologies has also been downgraded with a revised target of Rs 871 (from Rs 1,717).
The brokerage has also turned negative on Wipro and Tech Mahindra, downgrading both to ‘Sell', with target prices of Rs 152 and Rs 1,120, respectively, reflecting compressed valuation multiples and growth concerns.
In the mid-cap IT space, LTIMindtree has been downgraded to ‘Sell', with a target price of Rs 3,185 (earlier Rs 4,418), indicating limited upside amid sector-wide challenges.
Meanwhile, Persistent Systems and Coforge have been downgraded to ‘Hold' from ‘Buy', with target prices revised to Rs 5,315 and Rs 1,395, respectively, suggesting capped upside potential from current levels.
Mphasis remains a ‘Hold', albeit with a marginally lower target price of Rs 2,347, as the brokerage stays cautious on near-term growth triggers.
Overall, Nirmal Bang believes that valuation multiples across the IT sector are likely to compress further, as earnings visibility weakens and technological disruption from Gen AI reshapes the demand landscape.
The brokerage maintains that risk-reward remains unfavourable for most IT stocks at this stage, justifying its broadly bearish stance.
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