Choice Institutional Equities, a prominent domestic brokerage, has announced a significant revision of its ratings and share price targets for several key Indian IT companies. The changes, released on July 5, 2026, reflect a cautious outlook for the sector, with HCLTechnologies Ltd seeing an upgrade while Mphasis Ltd, Persistent Systems Ltd, Tech Mahindra Ltd, and Zensar Technologies Ltd faced downgrades.
Indian IT Sector Faces Prolonged Weakness
According to Choice Institutional Equities, the first quarter of fiscal year 2027 (Q1 FY27) is shaping up to be another challenging period for the Indian IT industry. The brokerage noted a continued deterioration in demand conditions, indicating that the anticipated recovery has been pushed further into the future.
Factors contributing to this sustained pressure include persistent macroeconomic uncertainty, slower enterprise decision-making processes, the impact of AI-led productivity improvements on revenue, and ongoing geopolitical disruptions. These elements are collectively suppressing discretionary spending, leading to muted sequential growth across the IT sector.
Outlook for Large-Cap vs. Mid-Tier Firms
The brokerage anticipates that large-cap IT companies will likely report broadly flat to marginally negative constant-currency (CC) growth. In contrast, mid-tier companies are expected to demonstrate better performance, driven by new deal ramp-ups and gains in market share.
With growth in the first half of FY27 tracking below the pace needed to meet annual guidance, Choice Institutional Equities expects further estimate revisions and selective guidance resets from companies in the coming quarters. Consequently, the brokerage has reduced its FY27–28 earnings estimates across the sector, citing slower demand recovery, weaker discretionary spending, and higher AI-led revenue deflation. Target multiples and fair values have also been cut, reflecting weaker medium-term growth visibility and increased execution risk.
While sector valuations have corrected, indicating potentially limited downside, a sustained re-rating will depend on clear evidence of demand stabilization, accelerating revenue growth, and the successful commercial monetization of generative AI beyond mere productivity gains.
Specific Rating and Target Price Revisions
- HCLTechnologies Ltd: Upgraded to 'Buy' from 'Add', with a revised target price of Rs 1,410 (down from Rs 1,500).
- Mphasis Ltd: Downgraded to 'Add', with a new target price of Rs 2,520.
- Persistent Systems Ltd: Downgraded to 'Add', with a new target price of Rs 5,010.
- Tech Mahindra Ltd: Downgraded to 'Add', with a new target price of Rs 1,600.
- Zensar Technologies Ltd: Downgraded to 'Add', with a new target price of Rs 560.
Other IT Stocks
Choice Institutional Equities maintained its 'Buy' ratings for Tata Consultancy Services Ltd (TCS), Infosys Ltd, and Happiest Minds Technologies Ltd, though their target prices were reduced to Rs 2,625, Rs 1,360, and Rs 440, respectively. Coforge Ltd also retained its 'Buy' call with an unchanged target price of Rs 1,900. Wipro Ltd's 'Add' rating was maintained, but its target price was lowered to Rs 185.