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Informist, Wednesday, Mar. 11, 2026

 

MUMBAI – Brokerage firm Nuvama Institutional Equities remains positive on the domestic information technology sector in the medium to long term, although the near-term volatility is expected to persist, it said in a report Tuesday. After the sharp correction over the past two months, the valuations of IT services stocks are close to bottoming out, the brokerage said. Further, the earnings downgrade cycle has bottomed out for the sector with limited scope for any further cuts. 

 

Further, Nuvama has upgraded its recommendation on HCL Technologies Ltd., Wipro Ltd., Tech Mahindra Ltd. and Hexaware Technologies Ltd. to 'buy' with the current valuations being highly attractive. With this, the brokerage has a 'buy' call on all top 10 domestic IT services companies, Nuvama said. "We believe investors would make handsome returns in any/all of these stocks from current levels over the next 12–15 months," it said. However, Coforge Ltd., LTIMindtree Ltd., Persistent Systems Ltd., Mphasis Ltd., Infosys Ltd. and Tata Consultancy Services Ltd. are its top picks in the sector.

 

The brokerage said it sees no existential threat for the sector from generative artificial intelligence, as the requirement for a system integrator which can customise an enterprise's plug-and-play software's input and output as per its requirements will always exist. Further, it noted that enterprises going for automation of tasks shall still need someone to take ownership of the system and that will be IT Services firms. 

 

"We firmly believe Gen-AI (including its various forms such as Agentic AI) shall be unable to displace the IT services industry model in any meaningful manner," Nuvama said. The customised, high-fidelity solutions that IT Services companies provide shall be extremely difficult for enterprises to substitute with new products that have little track record of success at the enterprise level. 

 

While the generative AI is expected to cause revenue compression in the early years, it will eventually expand the total addressable market for Indian IT companies, that would start recapturing market share once the technology becomes mature, Nuvama said. Currently, the industry is in 'innovators' phase in terms of generative AI, where it is reporting revenue deflation and market share being taken by new start-up companies. Nuvama expects this phase to continue for another few quarters. 

 

Over the medium-to-long term, generative AI is likely to create a mammoth incremental opportunity for IT Services companies, Nuvama said, adding that in one to two years generative AI will reach the 'early adopters' phase, in which the new technology finds widespread adoption, Indian IT companies train themselves for it and hit the scene with the same delivery capability at lower cost and better delivery capabilities.

 

Further, as the adoption of generative AI becomes widespread, the net hiring by the Indian IT sector is likely to reduce, as many low-level coding and low-skill tasks will be done using various generative-AI platforms, Nuvama said. The net hiring by the industry has slowed down in the past few years, led by the weak global macroeconomic conditions.   End

 

Reported by Arya S. Biju

Edited by Deepshikha Bhardwaj

 

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