Citi has maintained a cautious stance on the Indian IT sector, highlighting high valuations and global macro uncertainties as key concerns. The brokerage finds that the NSE IT index trades at ~24x forward earnings, despite a 16% decline year-to-date (YTD).
Key takeaways from Citi’s report on IT
- US macroeconomic indicators signal a challenging near-term outlook, impacting IT demand.
- Revenue growth for FY26 is expected to be around 4%, in line with FY25 estimates, indicating muted expansion.
- Margin improvement remains difficult, given the competitive environment, despite potential benefits from currency fluctuations.
- Mphasis has been upgraded to Neutral (from Sell) following a sharp correction in stock price.
- HCLTech and Infosys remain Citi’s preferred picks in the large-cap IT space, given their relatively stronger positioning compared to peers.
Citi’s cautious stance reflects macroeconomic headwinds and limited growth visibility, though selective opportunities remain in the sector.
(Disclaimer: This article is for informational purposes only and does not constitute financial advice.)