India's leading information technology companies, including Tata Consultancy Services (TCS), Infosys, Wipro, and HCLTech, have experienced a significant downturn in their market capitalization. This sharp correction is primarily driven by the disruptive impact of artificial intelligence (AI) and a broader environment of weak global demand for IT services.
Combined IT Market Cap Dips Below Reliance Industries
The combined market valuation of the top five Indian IT firms—TCS, Wipro, Infosys, HCL Technologies, and Tech Mahindra—has plummeted, now falling below that of Reliance Industries Ltd (RIL). As of July 2026, their total market cap stood at approximately 18.15 lakh crore rupees, a substantial drop of over 46 percent from a peak of 33.71 lakh crore rupees in August 2024. In contrast, RIL, while also experiencing a correction, commanded a market cap of 17.65 lakh crore rupees, a 16.7 percent dip from its June 2024 high of 21.2 lakh crore rupees. This marks a notable shift, as just a couple of years prior, TCS was vying with RIL for the top spot in India Inc's market valuation.
Factors Driving the Downturn
Investors are reassessing the growth prospects for Indian IT amidst several headwinds. Global technology spending has slowed, exacerbated by geopolitical tensions and macroeconomic uncertainty, leading enterprises to become more cautious with discretionary IT budgets. This has resulted in delays in deal closures and slower project ramp-ups. Concurrently, the rapid adoption of Generative AI is intensifying pricing pressures, as automation and AI-driven productivity gains reduce the demand for traditional IT services.
Brokerage Outlooks and Downgrades
Leading brokerages, including JP Morgan and JM Financial, have issued cautious outlooks for the Indian IT sector ahead of the Q1 FY27 results, which TCS is set to kick off on July 9, 2026. Both firms highlight GenAI-led pricing deflation, ongoing geopolitical uncertainty, and tighter enterprise technology budgets as key pressures. They note that increasing expenditure on AI tokens and cloud services is diverting funds from conventional technology services.
- JP Morgan has described the sector as stuck at 2-3% revenue growth over the past three years, with unclear recovery prospects. The brokerage has cut its medium and long-term growth estimates, now expecting large-cap firms to hover around 3-4% growth instead of returning to mid-single digits. JP Morgan has also reduced target P/E multiples by 10-25%. It has downgraded HCLTech and Wipro to "underweight" from "neutral" and also downgraded Tata Technologies. Its preferred picks include TCS, Infosys, and Tech Mahindra.
- JM Financial echoed concerns, anticipating Q1 FY27 to be weaker than expected, partly due to disruption from the Middle East conflict. The brokerage expects Infosys to lower its FY27 constant-currency revenue guidance and projects Wipro to guide for flat to negative quarter-on-quarter growth in Q2. JM Financial prefers TCS over Wipro, Tech Mahindra over HCL Tech, and Mphasis over LTIMindtree in near-term pair trades, maintaining a cautious stance on the sector overall.
The consensus among analysts points to continued pressure on the Indian IT sector, with AI disruption and demand weakness expected to persist as significant challenges in the coming years.