India’s IT sector is going through a slow phase as deal wins take time, client budgets remain tight, and earnings estimates move lower, according to Jefferies. The brokerage says this has kept valuations under pressure, but it also notes that several stocks now trade closer to their long-term averages, which improves the risk-reward setup.
Jefferies says most large firms have seen earnings cuts through CY25, while mid-sized firms have held up better. The brokerage adds that the sector’s weak stock returns this year are linked to these earnings downgrades.
However, the brokerage still finds six selective Buy-rated ideas with upside potential upside upto 23%.
Jefferies on Infosys: ‘Buy’
Jefferies has set a target price of Rs 1,700 on Infosys, which implies a 9% upside from current levels. The brokerage says Infosys remains one of the stronger large-cap choices as its revenue base is more diversified than its peers.
Jefferies notes that Infosys trades at valuation levels close to its long-term range, which makes the downside limited. The report says the company’s earnings estimates have been trimmed, but not as sharply as some other large names.
Jefferies adds that operating margins are stable, and it expects Infosys to recover gradually once client spending improves. The brokerage says this steadiness supports its Buy call.
Jefferies on HCLTech: ‘Buy’
Jefferies has placed a target of Rs 1,730 on HCLTech, offering a 7% upside. According to Jefferies, HCL Tech has delivered better-than-expected earnings stability compared to many peers, especially in its services business.
Jefferies said HCLTech’s margin outlook is steady, and its large recurring revenue base gives it better visibility. The brokerage points out that earnings cuts have been lower for HCL Tech relative to other large-cap names.
Jefferies believes that even with slow sector demand, HCL Tech’s mix of services and products helps it maintain stable performance, which supports the Buy stance.
Jefferies on Coforge: ‘Buy’
Coforge carries a target price of Rs 2,180, with a 17% upside. Jefferies says Coforge stands out among mid-caps due to its consistent deal activity and earnings upgrades through the year.
Jefferies noted that Coforge has avoided the sharp earnings cuts seen in large-cap IT and instead recorded upward revisions. The brokerage adds that this has helped Coforge outperform the broader IT index.
Jefferies also says Coforge’s execution remains strong and that its margin performance is in line with expectations. The brokerage believes this combination supports further stock gains.
Jefferies on Hexaware: ‘Buy’
Hexaware has a target price of Rs 820, indicating an 8% upside. Jefferies says Hexaware is one of the few IT names that has delivered positive stock returns in CY25 despite sector-wide weakness. Jefferies added that Hexaware’s earnings estimates have held up better than most mid-cap peers, which gives the company a relative advantage. The brokerage says the company’s margin structure also remains reasonably stable.
Jefferies believes Hexaware can continue to benefit from its strong client relationships and disciplined cost approach, supporting the Buy view.
Jefferies on Sagility: ‘Buy’
Sagility carries a target price of Rs 62, translating to a 23% upside, the highest among Jefferies’ IT picks. The brokerage says Sagility has seen consistent upgrades in earnings estimates, which makes it stand out in the BPO segment.
Jefferies noted that Sagility’s margin profile remains stable and that its revenue trends have held up better than several traditional IT service firms. The brokerage adds that the company’s focus on healthcare outsourcing gives it a steady demand pipeline.
Jefferies says Sagility’s strong estimate revisions and relatively low valuation support the high upside in its target price.
Jefferies on MphasiS: ‘Buy’
MphasiS has a target price of Rs 3,260, offering a 16% upside. Jefferies says Mphasis has faced earnings cuts due to weak BFSI demand, but the brokerage also notes that the stock’s valuation has corrected enough to make the risk-reward more attractive.
Jefferies states that Mphasis’ margin performance has stayed consistent, and that the company’s deal activity gives it room for gradual improvement once BFSI spending picks up.
Jefferies believes the stock offers reasonable upside as the pressure from earnings downgrades eases and valuations stabilise.