Global brokerage Jefferies has downgraded ratings on six major Indian IT companies amid AI disruption fears. According to Jefferies analysis, AI may structurally change the IT business mix towards consulting/implementation while reducing managed services, increasing cyclicality and requiring changes in talent and operating models. The downgrades include Infosys rating cut to HOLD from BUY with target price reduced to ₹1,290 from ₹1,880, HCL Technologies downgraded to HOLD from BUY with target price lowered to ₹1,390 from ₹1,885, and TCS rating reduced to Underperform with target price cut to ₹2,350 from ₹3,485. Other downgrades include Mphasis to HOLD from BUY with target price reduced to ₹2,450 from ₹3,410, LTIMindtree to Underperform with target price lowered to ₹4,300 from ₹6,175, and Hexaware Tech to Underperform with target price cut to ₹460 from ₹660. As per Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, "The trend of weakness in tech stocks stemming from the potential AI impact continues. The weakness in the ADRs of Indian IT companies indicates that this segment will continue to remain under pressure."
Infosys shares continued their downward trajectory on Tuesday, plunging 2.74% to emerge as the biggest loser for the second consecutive day. According to latest reports, all IT stocks have crashed and recorded double-digit percentage decline in a month, with the Nifty IT index nosediving by nearly 3% to trade at 30,721.35, extending its fall to nearly 20% in a month. The decline came amid a broader decline in IT stocks, with large tech players like TCS, Wipro, HCL Technologies, Infosys, Tech Mahindra, LTIMindtree and more dragging the broader Indian market, pushing Sensex and Nifty to fall by nearly 1% each in the early session. The worst performers in a month include Coforge and Infosys who nosedived by nearly 23% each, followed by Persistent who fell by 21.2% and LTIM who dropped by nearly 20%. TCS has recorded nearly 18% decline, while Wipro is down by 15.44%. HCL Tech emerged as the top loser today, declining 1.72%, followed by Tech Mahindra at 1.43% and Infosys at 1.35%, while Hindalco also declined 1.31%.
Analysts maintained a bearish view on large-cap IT stocks since early 2026, as artificial intelligence is changing the traditional IT-services model model faster than expected. As reported by Moneycontrol, Prasenjit Paul, Fund Manager at 129 Wealth & Research and Analyst at Paul Asset, explained that "IT companies' management demand commentary going into the silent period for September quarter results remains cautious at best." The analyst noted that weak macro fundamentals due to geopolitics, higher rates and inflation pose downside risk to earnings. According to Jefferies calculations, at current market price, stocks are pricing in INR revenue CAGR of 6-14% for large IT firms and 9-17% CAGR for mid-sized IT firms over FY26-36, with terminal growth rates ranging from 4% (Wipro) to 7% (IKS). These growth rates are 6-12% lower than the growth rates in FY16-26E for Sagility, Hexaware and IKS, 3% lower than the growth rates in FY16-26E for TCS, Infosys, HCLTech, Coforge, but 1-2% higher vs. growth rates in FY16-26E for Wipro and TechM.
According to Paul Asset's analysis reported by Moneycontrol, "Infosys itself says it is accelerating investments in AI, talent and platforms, while Q1 FY27 margin was still healthy at 21.1 percent." These investments are expected to keep near-term growth and margin expansion under pressure. The technical outlook remains challenging, with the stock around ₹1,040 versus its 200-DMA near ₹1,289, indicating weak structure. Paul recommended that until the stock crosses and sustains above its 200-DMA, investors should avoid the stock, while existing investors can use short-term rallies to reduce exposure. All stocks are down, but Infosys is leading the downfall, followed by HCL Tech which tumbled by 2.71%, Persistent Systems who dropped by 2.35% and TCS who is the largest tech company of India, declining by 2.32%. The Nifty IT index is currently near its 52-week low of 30,918.95, with mega tech stocks like TCS, Infosys, HCL Tech and Wipro nearing their 52-week low.
CLSA flagged subdued demand as a risk to the sector's medium-term earnings outlook, as reported by Moneycontrol. The brokerage noted that weak macroeconomic fundamentals, impacted by geopolitics, higher rates and inflation, have kept discretionary demand muted, implying more earnings-per-share downside risk, particularly for Infosys and Wipro. However, CLSA said order books and employee headcount are expected to remain largely stable, reducing the risk of extreme negative repercussions from AI rollouts on renewed deals and IT jobs. The banking, financial services and insurance (BFSI) vertical continues to see resilient demand. Despite the challenges, Jefferies believes these IT stocks offer higher downside potential, though the current trend of weakness is expected to continue.
