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Informist, Friday, Aug. 21, 2026

 

MUMBAI – The outperformance of mid-cap information technology stocks against their large-cap peers is likely to continue in the near term, analysts said. While brokerages continue to maintain that current AI-led revenue deflation will eventually give way to new AI implementation contracts and productivity gains, the gestation period between the two situations has capped the upside for most IT players, particularly large-caps. 

 

Brokerage JM Financial Services said it expects overall technology spending to rise 3–5% year-on-year, supporting 4–6% on-year growth for Indian IT service companies. However, the ongoing transition toward AI-led productivity gains is likely to create a near-term challenge, due to which the brokerage expects just 3.5% year-on-year sales growth, including inorganic contribution, in FY27 in constant currency terms. "We expect large IT companies' growth to lag mid-tier peers' as mid-tier companies will likely be able to pivot faster given their size and execution," the brokerage said.

 

"AI-led deflation is already visible, in our view, as productivity gains slash human effort. However, there are increasing instances of enterprise technology budgets being completely utilised as AI adoption drives incremental consumption," JM Financial said. The brokerage argued that companies will increasingly seek service providers that can integrate AI into workflows, optimise consumption and deliver measurable business outcomes. This strategy is likely to lure service providers to capture a larger share of spend over the medium term due to cloud adoption or platform migration.
 

Global brokerage CLSA downgraded Tata Consultancy Services, Infosys, and Tech Mahindra to 'hold' from 'outperform' earlier this week. The brokerage also downgraded Wipro and Mphasis to 'underperform' from 'hold'. These companies will take a long time to reap the benefits of AI-related productivity gains and record substantial order wins in AI-led transformation contracts, media reports said, citing the brokerage.

 

CLSA retained 'outperform' ratings on Persistent Systems and Coforge, and maintained 'outperform' on LTM and Hexaware Technologies. Large IT services companies are in a difficult position as AI threatens to drive deflation in legacy managed services at the same time that macroeconomic uncertainty weighs on technology spending, the brokerage said. Echoing this view, Kotak Securities later in the week said open-weight models could increase service intensity and accelerate AI adoption. However, faster adoption could also drive greater deflation in IT services.

 

Kotak Securities also downgraded Infosys and Tata Consultancy Services, to 'add' from 'buy.' It also downgraded LTM to 'sell' from 'reduce.' The brokerage expects high pricing pressure due to lack of availability of deals in the IT industry. However, Kotak Securities added that fears of the terminal value of IT services businesses have lessened, which has provided a floor to valuations.

 

This week, the Nifty IT index ended 2.6% lower at 30877.20 points, underperforming the Nifty 50 on its way down. The Nifty IT index is gradually drifting lower after facing resistance around the 32000 spot level, Vipin Kumar, assistant vice-president of research at Globe Capital Markets, said. The analyst expects the index to trade in a range in the short term, with immediate support placed around 29500–29000 points and resistance at 31500–32000 points.  

 

TOP HEADLINES

 

* Netweb Tech QIP closes; issue price set at INR 4,790 per share
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* IPO Alert: Shiprocket listing Wed; issue price set at INR 97/share
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* AI drove nearly half of IT acquisitions in past 2 years, says Crisil Ratings
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* Brightcom Group Apr-Jun consol PAT rises 24% YoY to INR 2.62 billion
* Zaggle Prepaid Apr-Jun consol PAT falls 33% YoY to INR 175.33 million

 

Following are the resistance and support levels for key IT stocks for next week as per calculations based on their prices on the National Stock Exchange:

 

Company	Price	Week-on-week  change in %	Resistance	Support
Coforge Ltd	1,891.70	4.40	1,918.80	1,837.40
HCL Technologies Ltd	1,302.50	(-)4.20	1,328.10	1,289.70
Infosys Ltd	1,121.00	(-)4.10	1,139.70	1,108.70
L&T Technology Services Ltd	3,604.60	3.70	3,658.30	3,547.50
LTM Ltd	4,487.80	(-)4.80	4,552.70	4,382.30
Mphasis Ltd	2,430.00	(-)4.50	2,468.00	2,367.40
Persistent Systems Ltd	5,667.50	1.60	5,783.80	5,543.80
Tata Consultancy Services Ltd	2,302.00	(-)2.50	2,334.70	2,246.90
Tech Mahindra Ltd	1,584.00	(-)3.00	1,613.00	1,562.00
Wipro Ltd	180.79	(-)1.70	182.60	179.10
Index	Levels
Nifty IT	30532.25	(-)2.60	30877.20	30164.50
Nifty 50	24252.00	(-)0.50	24324.90	24170.40
BSE Sensex	77540.83	(-)0.60	77850.60	77291.00

 

End

 

Reported by Eshitva Prakash

Edited by Avishek Dutta

 

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