- Indian IT stocks rallied recently, but UBS remains cautious on the sector overall
- UBS upgraded Tech Mahindra, Coforge, and Mphasis while downgrading HCLTech and Persistent
- Target prices raised for upgraded stocks: Tech Mahindra Rs 1865, Coforge Rs 2400, Mphasis Rs 2980
Indian IT stocks have rallied sharply in recent weeks, but UBS believes the move does not yet justify a broad-based bullish stance on the sector. The brokerage has instead rejigged its stock preferences, upgrading Tech Mahindra, Coforge and Mphasis, while downgrading HCLTech and Persistent Systems.
UBS has upgraded Tech Mahindra to Buy from Neutral and raised its target price to Rs 1,865 from Rs 1,460. The brokerage has also upgraded Coforge to Buy from Neutral, with the target price sharply increased to Rs 2,400 from Rs 1,505, a 59% increase.
Mphasis has also been upgraded to Buy from Neutral, with UBS hiking its target price to Rs 2,980 from Rs 2,440.
On the other side, UBS has downgraded HCLTech to Neutral from Buy, although its target price has been raised to Rs 1,415 from Rs 1,390. Persistent Systems has also been downgraded to Neutral from Buy, with the target price increased to Rs 6,250 from Rs 5,995.
Among its other calls, UBS has maintained Buy on Infosys and raised its target price to Rs 1,445 from Rs 1,425. It has retained Neutral on TCS, while raising the target to Rs 2,565 from Rs 2,545. Wipro remains Neutral with a Rs 200 target, while LTM stays Neutral with the target raised to Rs 4,995 from Rs 4,080.
Why UBS is Selective on IT Stocks
UBS said part of the recent Nifty IT rally reflects a rotation away from global AI infrastructure and semiconductor beneficiaries and into Indian IT services.
The brokerage noted that investors are increasingly questioning some of the long-standing bearish arguments around IT services, including concerns over AI-driven job losses. However, it believes the evidence needed to support a broad-based bullish view remains limited. It also highlighted that enterprise AI adoption is creating demand around implementation, integration, data readiness, governance and workflow redesign.
The brokerage noted that Nifty IT has risen nearly 20% from its July lows, making stock selection increasingly important after the sharp rally.
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