Time To Get More Positive On Indian IT Services Now, Says Motilal Oswal As It Upgrades Rating To 'Overweight'

Motilal Oswal maintains positive view on Indian equities on the back of an improving earnings momentum, reasonable valuations, a sustained whatever-it-takes approach of policymakers, robust macro markers aided by prospects of a thaw in geopolitical relations, and likely bottoming of FII selling..NDTV Profit’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer NDTV Profit’s subscribers an opportunity to expand their understanding of companies, sectors and the economy..Motilal Oswal Report.Indian markets have bounced back despite one of the heavyweight sectors (Indian IT services) underperforming in the past 12 months, with the Nifty IT Services Index down 12% YoY vs 10% YoY gain in the Nifty-100. However, we believe that Indian IT services could also be at a bend in the road. Our IT analyst contends that the wait for the emergence of a new AI services cycle could be in its final legs. Global AI hyper-scalers are now witnessing diminishing marginal utility on AI infrastructure. Such developments have generally heralded a transition in technology’s evolution from the infrastructure buildout stage to stacking up of applications and services on this infrastructure (e.g., internet, cloud infrastructure). This transition will now align with the strengths of Indian IT services companies as Gen-AI services are to likely inflect in mid-2026..Time to get more positive on Indian IT services now: While the inflection point in Gen-AI services spending may still be a few quarters away, we believe that the past one-year and three-year periods of underperformance (three-year CAGR of 8% for Nifty IT Services Index vs 13%/16% for Nifty-50/Nifty-500) offer attractive valuations to start increasing portfolio weight in Indian IT names selectively and gradually. Indian IT services' share in Nifty profits has been stable at 15% for the past four years, whereas its weight in the benchmark index is now at a decadal low of 10% (from 19% in Dec’21). Accordingly, we are now raising IT Services from an underweight position to a mildly overweight by bringing Infosys into our model portfolio. We believe that Infosys will be a key beneficiary of the enterprise-wide AI spends as its Topaz suite of AI services coupled with capabilities in full-stack app services will be back in preference. Moreover, at the current valuations of 21.7x 12mth fwd EPS, risk-reward is favorable..Click on the attachment to read the full report:.Motilal Oswal Maintains 'Buy' On AU Small Finance Bank, Revises Target Price — Check Details.DISCLAIMERThis report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit..Users have no license to copy, modify, or distribute the content without permission of the Original Owner.

Time To Get More Positive On Indian IT Services Now, Says Motilal Oswal As It Upgrades Rating To 'Overweight'

Motilal Oswal raises Indian IT services to mild-overweight by trimming its position in consumer discretionary and healthcare names.

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