The IT sector stocks are in focus ahead of the Q3 earnings next week. Jefferies has issued a cautious but selective outlook for the Indian IT services sector heading into 2026, forecasting a modest revenue growth recovery to 4.7% YoYcc for FY27. There is a distinct preference for mid-sized firms, citing their superior earnings growth potential compared to traditional large-cap players.
In a detailed sector analysis, the brokerage firm noted that while the US economic environment shows signs of improvement, the industry must contend with rising geopolitical risks, AI-driven revenue deflation, and a reallocation of client budgets toward hardware. Faced with these pressures, Here are the top IT sector picks by Jefferies.
Jefferies’ top IT stock picks
Jefferies on Infosys: ‘Buy’
Infosys Ltd. is positioned as a strong recovery play among large-caps, supported by significant deal wins and high revenue growth potential. It is expected to deliver a 5.0% YoYcc revenue CAGR over FY26-28E, the highest among top-five firms. Furthermore, its lower exposure to AI-vulnerable segments like BPO and its status as a preferred AI partner for major global banks provide a defensive edge in an uncertain market. Based on these strengths, Jefferies has set a target price of Rs 1,860, representing a 13% upside.
Jefferies on HCL Technologies: ‘Buy’
Described as a much-improved franchise, HCL Technologies Ltd. benefits from strong deal bookings and a focus on infrastructure services, which are more resilient to AI deflation. Jefferies projects a 10% EPS CAGR through FY28, outperforming TCS and Infosys in earnings growth. The firm is expected to see margin normalization back to the 18-19% range as it leverages its infrastructure-heavy portfolio. With a target price of Rs 1,850, the stock offers an estimated 13% upside.
Jefferies on Coforge: ‘Buy’
Coforge Ltd. is a top pick in the mid-cap space, expected to deliver a 15% YoYcc CAGR through FY28. Growth is driven by recovery in financial services, a healthy order book of approximately $1.7 billion, and synergy benefits from the Cigniti acquisition. Jefferies believes the current valuation more than factors in potential dilution from its Encora acquisition, making it a high-conviction play with a target price of Rs 2,180 and a projected upside of 32%.
Jefferies on Sagility: ‘Buy’
A niche player in the US healthcare insurance sector, Sagility Ltd. is well-placed to deliver a 12% cc revenue CAGR. While EBITDA margins are expected to remain steady, normalization of depreciation costs and deleveraging should drive an 18% earnings CAGR, the highest in its peer set. Its specialization in the US healthcare payer market provides a unique growth trajectory, leading to a target price of Rs 70 and a significant 32% upside.
Jefferies on Mphasis: ‘Buy’
Jefferies views MphasiS Ltd. as the best play for recovery in the BFSI (Banking, Financial Services, and Insurance) vertical. After a period of muted growth, revenue is expected to accelerate to 10% levels in FY27-28, supported by its largest-ever deal pipeline and a return to growth in its logistics business. The company remains highly sensitive to a turnaround in US regional banking spend, carrying a target price of Rs 3,460 and a 23% upside.
Jefferies on IKS Limited: ‘Buy’
Recently upgraded to ‘Buy’, Inventurus Knowledge Solutions Ltd. offers the highest EPS growth in the coverage universe at a 27% CAGR (FY26-28E). The company provides tech-enabled solutions for US healthcare providers and is expected to see significant margin expansion of approximately 150bps as it continues to offshore AQuity’s operations. This operational shift is central to its earnings acceleration, supporting a target price of Rs 2,010 and an upside of 19%.
Jefferies on Tata Consultancy Services: ‘Hold’
Tata Consultancy Services Ltd. has shifted its strategy toward acquisitions and prioritizing growth over margins, but a ramp-down in the BSNL deal is expected to weigh on near-term performance. While it offers valuation comfort relative to the Nifty, its 5% recurring EPS CAGR is lower than that of its large-cap peers, limiting the potential for PE rerating. Current levels suggest the stock is fairly valued given the lower earnings trajectory, reflected in a target price of Rs 3,450 and a modest 6% upside.
Jefferies on LTIMindtree: ‘Hold’
Despite deal wins in non-core verticals, growth among LTIMindtree Ltd‘s top clients remains muted. With a subdued 8% revenue CAGR expected and the stock already trading at a rich 49% premium to the Nifty, Jefferies believes the current risk/reward profile is unfavorable. Investors are essentially paying a premium for growth that has yet to materialize at the top tier of their client base, resulting in a target price of Rs 6,200 and a 2% upside.
Jefferies on Hexaware Technologies: ‘Hold’
Downgraded from ‘Buy’ to Hold, Hexaware Technologies faces pressure from top clients and a high reliance on H1B visas, which may be impacted by rising fees and policy changes. These factors are expected to limit margin expansion, resulting in an 11% EPS CAGR, which is among the lowest in the mid-cap coverage group. The regulatory environment poses a significant headwind to its offshore-heavy delivery model, leading to a target price of Rs 820 and a 9% upside.
Jefferies on Wipro: ‘Underperform’
Wipro Ltd. is expected to continue lagging its peers with the lowest organic growth (2.2% cc) in the coverage universe. A high exposure to consulting services and delays in deal ramp-ups remain key risks to the stock’s performance. Jefferies notes that Wipro would need much higher dividend yields of 5% or more to become attractive, given its persistent low-growth profile, leading to a target price of Rs 220 and a potential downside of 18%.
Jefferies on Tech Mahindra: ‘Underperform’
Tech Mahindra faces significant revenue growth limits of 3-4% due to its high exposure to the communications vertical. Jefferies views management’s 15% margin aspiration as overly optimistic, given the weak demand environment, and expects further EPS cuts in the near term. The company’s restructuring efforts have yet to demonstrate a clear path to top-line acceleration, supporting a target price of Rs 1,350 and a potential downside of 16%.
What it means for investors?
The Jefferies report suggests a widening performance gap within the Indian IT sector. As AI-led productivity demands from clients begin to eat into traditional revenue streams, the brokerage argues that investors must prioritize firms with high organic growth and vertical-specific expertise. In this climate, the “one-size-fits-all” growth story of the past appears to have ended, replaced by a market that rewards surgical stock selection over historical momentum.
Disclaimer: This article provides factual analysis only and is not, and should not be construed as, an offer, solicitation, or recommendation to ‘Buy’ or sell securities. Investors must conduct their own independent due diligence and seek advice from a SEBI-registered financial advisor.