Choice Institutional Equities has named Coforge Ltd, Persistent Systems Ltd, and Tech Mahindra Ltd as its top investment picks among Indian IT companies. This recommendation comes amidst increasing technology spending by major banks and a growing emphasis on artificial intelligence (AI), cybersecurity, cloud, data analytics, and modernization.
Key Drivers for IT Sector Growth
According to Choice, banks' technology spending is entering a significant reinvestment cycle. Technology budgets at major banks have reportedly risen by approximately 16 percent since June 2024 and saw a 7.8 percent year-on-year increase by June 2026, despite broader macroeconomic uncertainties. This spending is increasingly directed towards critical areas like AI, cybersecurity, cloud infrastructure, data management, and overall modernization efforts, with AI acting as a catalyst for a broader technological transformation.
The banking, financial services, and insurance (BFSI) segment is highlighted as a relatively bright spot for Indian IT firms. Choice emphasizes that vendor consolidation and the ability to gain wallet share will be crucial for IT companies, potentially outweighing overall growth in technology spending. The brokerage prefers vendors that combine significant scale, deep BFSI domain expertise, robust modernization capabilities, and differentiated AI offerings.
However, Choice also notes that AI-led productivity gains and outcome-based pricing models could temper revenue conversion for these firms.
Top Picks and Target Prices
Against this backdrop, Choice Institutional Equities considers Coforge, Persistent Systems, and Tech Mahindra to be the best-positioned beneficiaries and its leading investment ideas:
- Coforge Ltd: Rated 'BUY' with a target price of Rs 2,050.
- Persistent Systems Ltd: Also carries a 'BUY' rating, with a target price of Rs 6,350.
- Tech Mahindra Ltd: Given an 'ADD' rating, with a target price of Rs 1,775.
Other Noteworthy Ratings
While these three stand out, Choice also issued ratings for other prominent IT firms:
- 'REDUCE' ratings: Tata Consultancy Services Ltd (TCS) with a target of Rs 2,320, Infosys Ltd at Rs 1,140, Wipro Ltd at Rs 170, HCL Technologies Ltd at Rs 1,330, and Mphasis at Rs 2,520.
- 'SELL' rating: LTM (formerly LTIMindtree) with a target price of Rs 4,350.
- 'ADD' ratings: Zensar Technologies Ltd with a target of Rs 550 and Happiest Minds Ltd with a target of Rs 440.