Morgan Stanley has turned constructive on IT stocks following a 15% rebound from May lows amid AI-driven optimism and resilient software demand. According to ET Now, the brokerage expects the IT sector to deliver 6-7% growth annually over the next two to three years, marking a significant turnaround from near-zero growth witnessed over the last couple of years. The positive outlook is supported by currency benefits that could flow more directly into profits as localisation has largely stabilised, with local employee share previously rising from 20-23% to 65-70% in developed markets. Analysts project that profit after tax (PAT) of most IT companies could rise by nearly 70% from current levels over the next two to three years.
Morgan Stanley has retained an equal weight rating on Infosys Ltd with a target price of ₹1,380, implying an upside potential of 12.4% from current levels. The brokerage maintains its buy rating on Infosys with a target price of ₹2,200, representing significant upside potential from current levels. According to ET Now, the positive outlook is supported by Infosys's AI-focused annual report and strategic partnership announcements that demonstrate the company's commitment to artificial intelligence capabilities. The stock, with a market capitalisation of ₹1,77,980 crore, has shown strong performance with gains of 20.7% over three months and remains positive at 1.5% year-to-date. Infosys has reiterated its FY27 revenue growth guidance of 1.5-3.5% in constant currency and an EBITDA margin guidance of 20-22%, with management expecting stronger seasonality in the first half of FY27.
Morgan Stanley has maintained an equal weight rating on HCL Technologies with a target price of ₹1,410, indicating an upside potential of nearly 18%. The brokerage noted that HCLTech's FY27 guidance assumes a stable macroeconomic environment, with AI services expected to grow by around 30%, contributing nearly 30% of total revenue over time. Among the three large-cap IT companies, Tata Consultancy Services (TCS) remains Morgan Stanley's preferred pick with an overweight rating and target price of ₹2,880, implying an upside potential of approximately 28%. The brokerage expects TCS to benefit from rising enterprise AI adoption despite broad-based decision-making delays among clients in Q1FY27, while Hypervault's data centre business is expected to generate attractive returns and support long-term growth.
Morgan Stanley has maintained an equal weight rating on Swiggy Ltd with a target price of ₹322, following the food delivery company's Q4FY26 results announced on May 8. According to ET Now, the brokerage projects 18-20% growth for the food delivery segment and notes that Swiggy is currently testing its 'Toing' pilot with lower average order values, with future expansion depending on the sustainability of unit economics. The company targets over 21 trillion net order value and a 4-5% EBITDA margin for quick commerce, while Swiggy reiterates Q1FY27 as the break-even timeline for quick commerce contribution margins. At the time of reporting, Swiggy shares were trading 1.82% higher at ₹254.35 compared to the previous closing price of ₹249.80.
IT stocks have gained more than 15% from the lows touched in May, reflecting improving investor sentiment after months of weakness driven by concerns over global growth and discretionary technology spending. According to ET Now, the recent rally suggests investors are increasingly positioning for AI-led growth opportunities and stronger demand outlook for software, cloud and digital transformation services. The Nifty IT index has rebounded sharply from its recent lows, with the sector showing encouraging signs of strength after a prolonged period of underperformance. Short-term returns have been positive with 2.3% gains in one week and 0.7% in one month, though longer-term performance remains mixed with 1-year returns at -19.7% and 6-month returns at -21.9%.
