Jefferies said the Nifty IT index has underperformed the Nifty by 25% so far in CY25, driven largely by a 16% derating in sector valuations amid macro uncertainty, weak discretionary spending and concerns around AI-led deflation. The brokerage noted that stock performance within the sector has closely tracked earnings revisions, with mid-tier companies outperforming large-cap names due to better deal momentum and narrower exposure to global macro risks.
According to Jefferies, while management commentary across major IT firms suggests that demand conditions are stabilising, visibility on a broad-based growth rebound remains limited. The brokerage added that cost-takeout deals continue to dominate the pipeline, implying that near-term revenue growth may stay muted. With FY27 consensus expectations appearing optimistic relative to current industry trends, Jefferies believes PE multiples are likely to remain capped for the sector over the medium term.
The brokerage maintained its preference for mid-sized IT companies, citing Coforge, Hexaware and Sagility as its top picks due to their execution track records, differentiated vertical mix and stronger deal pipelines. Among large-cap names, Jefferies favours Infosys and HCLTech, which it said offer a more favourable balance between valuation, deal wins and margin resilience compared with peers. The brokerage expects IT stocks to remain a “selective” trade rather than a broad sector call in 2026.
Disclaimer: The views and recommendations above are those of Jefferies. Business Upturn does not endorse them. Please consult a financial advisor before making investment decisions.
