According to reports from The Financial Express, Kotak Institutional Equities has positioned itself strategically in India's IT services sector, maintaining a 'Neutral' view while identifying clear winners and losers in the current environment. The brokerage believes the June quarter will be weaker than seasonal trends suggest as the industry grapples with AI-led pricing pressure, slowing discretionary spending, and cautious client budgets. Tata Consultancy Services remains the preferred large-cap pick due to its valuation discount, while Coforge, Hexaware, and Indegene are favored among mid-tier companies for their stronger execution capabilities and healthy deal momentum.
As reported by The Financial Express, Kotak has significantly revised its outlook due to artificial intelligence's impact on the industry. The brokerage reduced FY2027-FY2029 revenue estimates by around 0-1% and lowered fair values across the sector by up to 21%, reflecting sharper-than-expected impact from AI-led productivity gains. The rapid improvement in frontier AI models is beginning to alter the economics of traditional IT services, with enterprises increasingly demanding productivity benefits upfront in long-term outsourcing contracts. While AI opens new opportunities, most enterprise spending is being redirected from existing technology budgets rather than creating incremental demand.
According to The Financial Express, Kotak has identified specific reasons for favoring three mid-tier IT companies. Coforge continues to stand out due to consistent execution, healthy deal pipeline, and expanding global presence, with expected revenue growth following the consolidation of the Encora acquisition. Hexaware remains preferred because of improving deal pipeline and large client wins despite near-term earnings pressure from currency hedges. Indegene benefits from healthy demand across commercial and medical businesses, with steady deal activity and continued investments in life sciences technology.
As reported by The Financial Express, Kotak expects most large IT companies to struggle to achieve the midpoint of their annual guidance. Infosys is forecasted to report organic revenue growth of around 0.9%, while HCLTech's services business is expected to decline 1.1% sequentially. Wipro is likely to report another weak quarter and guide for -2% to 0% revenue growth for the September quarter. Despite near-term challenges, Kotak believes TCS remains the best-positioned incumbent among large-cap players due to its valuation discount and execution capabilities.
According to The Financial Express, Kotak believes the next phase of industry growth will favor challengers that continue to gain market share while incumbents adapt to structural changes in client buying behavior. The brokerage expects EBIT margins to remain broadly stable across most IT companies despite continued pricing pressure, with rupee depreciation during the quarter helping cushion margin pressure. Kotak emphasizes that sustainable growth will depend on companies generating net-new AI revenues rather than relying solely on productivity gains, with AI spending remaining the biggest long-term monitor for the industry's future performance.
