IT Stocks 2026: Broker target cuts highlight AI risk

Why brokerages are turning cautious on IT

Indian IT services stocks are seeing a wave of target price cuts and rating downgrades across brokerages. The common thread is concern that generative AI adoption could accelerate changes in the traditional services model and compress the long-term growth runway. Several notes also point to slower growth expectations and changes in valuation assumptions.

This shift in tone has not been uniform. Some brokerages are still positive on select companies, especially mid-sized firms that are viewed as more agile in repositioning offerings. But the overall messaging has become more cautious, with multiple houses moving to neutral or negative calls on large-cap names.

Nirmal Bang keeps an underweight view into FY27

Nirmal Bang retained an ‘underweight’ stance on the IT sector for FY27, stating that the business model transition is arriving sooner than it had expected. In its rating actions, the brokerage downgraded several bellwether and midcap names to ‘Sell’.

It cut ratings to Sell on TCS (TP: 1,693), Infosys (TP: 1,051), HCL Technologies (TP: 871), Wipro (TP: 152), Tech Mahindra (TP: 1,120) and LTM (TP: 3,185). It also downgraded Coforge (TP: 1,395) and Persistent Systems (TP: 5,315), while maintaining Hold on Mphasis (TP: 2,347).

Antique and YES Securities show a more mixed stance

Antique Stock Broking, in its latest strategy note, maintained Hold ratings on large-cap IT services companies. At the same time, it preferred select midcap names such as Coforge and Mphasis, signalling a tilt toward companies where it sees relatively better positioning.

YES Securities outlined a more constructive view on Infosys, projecting about 3.4% constant currency revenue growth in FY26 and pointing to life sciences as a segment gaining momentum. It also highlighted potential total contract value (TCV) deal wins of approximately USD 11.7 billion and expected margins of about 20.7%, slightly lower year-on-year due to higher third-party costs. YES maintained a Buy rating on Infosys with a target price of ₹1,672.

YES also had a Buy rating on Wipro with a target price of ₹272.

JM Financial: buys on select names, adds on others

From the IT pack, JM Financial listed Buy ratings on Infosys (TP: ₹1,525), Mphasis (TP: ₹2,695), KPIT Technologies (TP: ₹860), Sagility (TP: ₹56) and Firstsource Solutions (TP: ₹260).

JM also had Add ratings on a wider set of companies: TCS (TP: ₹2,660), HCL Tech (TP: ₹1,440), Tech Mahindra (TP: ₹1,550), Coforge (TP: ₹1,300), Persistent Systems (TP: ₹5,595), Hexaware Technologies (TP: ₹490), IKS Health (TP: ₹1,520), BlackBox (TP: ₹502) and CE Infosystems (TP: ₹950).

Ambit Capital: “not the time” to turn constructive

Ambit Capital said it is still not the time to turn constructive on the IT sector. It cut target prices for IT stocks by 7% to 21% and suggested Sell on nine of 11 stocks it covers, including Infosys, TCS, Wipro and Tech Mahindra, among others.

The note adds to the broader pattern of brokerages reassessing sector-level assumptions, even as some companies have reported results that earlier supported upgrades.

Kotak cuts fair values 15% to 28%, flags GenAI risks

Kotak Institutional Equities lowered earnings forecasts and target prices for several major Indian IT services companies, warning that fast adoption of generative AI could pose risks to the sector’s long-term growth trajectory.

Kotak revised EPS estimates for Infosys, TCS, Wipro, HCLTech, Tech Mahindra, Persistent Systems and Coforge, reducing EPS by 1% to 3%, and cut fair values by about 15% to 28%. It also adjusted its cost of equity assumption by 100 basis points.

Among the Tier-1 names, Kotak said it favors Infosys, TCS, and Tech Mahindra, highlighting that current valuations reflect muted growth expectations and offer free cash flow and payout yields.

Kotak: key target price revisions

Citi and CLSA: broad target price cuts, ratings differ

Citi Research lowered target prices across its India IT coverage by 14% to 29%, citing changes in valuation multiples and terminal growth assumptions, while maintaining a cautious stance.

Citi cut Infosys to ₹1,440 (from ₹1,700), TCS to ₹2,500 (from ₹3,020), and HCL Technologies to ₹1,460 (from ₹1,700). Among midcaps, it reduced LTIMindtree to ₹4,190 (from ₹5,415), Persistent Systems to ₹4,170 (from ₹5,455), Coforge to ₹1,100 (from ₹1,560), Tech Mahindra to ₹1,260 (from ₹1,500), Wipro to ₹185 (from ₹235), Hexaware to ₹475 (from ₹625), and Mphasis to ₹2,335 (from ₹2,905).

CLSA also cut target prices for eight IT companies including Coforge, HCL Tech, Infosys, LTIMindtree, Persistent Systems, TCS, Tech Mahindra, and Wipro. Even after the cuts, CLSA kept ratings largely positive: it retained high conviction Outperform on Coforge and Persistent Systems, kept Outperform on HCL Tech, Infosys, LTIMindtree, TCS, and Tech Mahindra, and assigned Hold to Wipro.

Jefferies downgrades, prefers mid-sized IT firms

Jefferies cut price targets and downgraded ratings on IT stocks, citing greater downside risks than upside due to AI-related disruptions. It downgraded Infosys, HCL Technologies and Mphasis from Buy to Hold, and moved TCS, LTIMindtree and Hexaware from Hold to Underperform.

Jefferies said it expects these stocks to fall between 2% and 18%. It also stated a preference for mid-sized IT firms, arguing they should grow faster due to a better ability to pivot to new opportunities. Jefferies’ top picks were Coforge, Sagility and IKS (Inventurus Knowledge Solutions), with forecast returns of 19% to 26%.

Market moves: Nifty IT declines as downgrades build

The caution in brokerage notes came as the Nifty IT index fell nearly 1.4% on Monday, extending a recent decline. In contrast, the benchmark Nifty ended 0.6% higher the same day.

While the article data does not link the index move to any single note, the clustering of target cuts and downgrades across brokerages shows a sector-wide reassessment. The focus is shifting from near-term execution to medium- to long-term questions around pricing power, effort-based billing, and the pace at which AI tools change delivery models.

What investors can take away from the broker consensus

Across brokerages, the dispersion in ratings remains wide. One set of houses has moved to outright negative calls or broad target cuts, while others still see value in specific names based on deal momentum, margins, or perceived agility.

The most consistent datapoints in the provided notes are the extent of fair value or target reductions and the explicit framing of AI disruption risk. Investors tracking the sector will likely watch for confirmation in subsequent deal wins, margin commentary, and how companies describe AI-led delivery changes in client engagements.

Conclusion

Brokerages have stepped up downgrades and target price cuts across Indian IT services stocks, with generative AI disruption emerging as a key reason for reduced long-term confidence. At the same time, select research houses continue to prefer specific midcap names and highlight company-specific positives such as deal momentum and segment strength. The next set of brokerage updates and company commentary on AI-led delivery models will remain central to the sector narrative.