JPMorgan's Insightful Indian IT Sector Outlook: Must-Have Stocks and Ones to Steer Clear Of!

JPMorgan’s Cautious Outlook on Indian IT Sector

In a recent analysis, JPMorgan, a leading global brokerage firm, has expressed a cautious outlook for the Indian IT sector. The firm is particularly optimistic about select mid-tier companies while scaling back growth estimates for larger Tier 1 and Tier 2 firms. Among the firms favored this quarter are Coforge, Infosys, KPIT Technologies, and Tech Mahindra, while Tata Consultancy Services (TCS), Wipro, HCL Technologies, Tata Technologies, and Tata Elxsi have been advised against.

Modest Growth Expectations

JPMorgan anticipates that fiscal 2026 will yield only modest growth, with no signs of acceleration in guidance. The firm has noted that the fourth quarter is expected to show softer seasonality, driven by challenging macroeconomic conditions and early indicators of deflation in the artificial intelligence (AI) sector.

Mid-tier firms are likely to maintain their growth momentum.
Large-cap companies may struggle to achieve consistent quarter-on-quarter growth.

To address these challenges, JPMorgan has revised its revenue forecasts downward for FY26 and FY27, cutting estimates by 3-5% for Tier 1 firms and 2-10% for Tier 2 companies.

Company-Specific Adjustments

In a strategic move, JPMorgan has downgraded HCL Technologies from “overweight” to “neutral” due to a lackluster fourth-quarter performance and sluggish deal wins amid macroeconomic pressures. The target price for HCL Tech has been reduced from ₹2,200 to ₹1,700.

Conversely, Tech Mahindra has been upgraded to “neutral” from “underweight,” with the brokerage regarding it as a "self-help margin story," though its target price remains unchanged at ₹1,500.

Additionally, target prices for several IT stocks have been adjusted downward, reflecting a cautious outlook:

TCS: from ₹4,500 to ₹3,900
Infosys: from ₹2,350 to ₹1,900
Tata Elxsi: from ₹5,400 to ₹4,500

Strategic Picks and Recommendations

In this uncertain climate, JPMorgan is selective in its IT sector recommendations, favoring firms with strong execution capabilities. The brokerage’s top picks include:

Coforge
Infosys
KPIT Technologies
LTIMindtree
Tech Mahindra

On the flip side, JPMorgan suggests avoiding:

TCS
Wipro
HCL Technologies
Tata Technologies
Tata Elxsi

This cautious approach is driven by uncertainty in demand and near-term growth challenges.

Future Outlook

The latest insights from JPMorgan highlight the significant hurdles that lie ahead for the Indian IT sector. While mid-tier firms like Coforge and KPIT Tech appear better positioned, larger companies may continue to grapple with stagnant growth due to declining discretionary spending and shifts in AI trends.

As fiscal 2026 approaches, investors are advised to adopt a selective strategy when navigating this complex landscape, as growth projections remain modest.

For more insights on market trends and investment strategies, stay tuned to our financial updates.