India’s information technology bellwethers like Infosys Ltd., Wipro and LTIMindtree Ltd. received a ratings upgrade from HSBC Research as the industry growth is expected to pick up in the next financial year.

A few names received downgrades as headwinds and the weak outlook in Europe continued to weigh.

The brokerage expects the industry growth to pick up to 6-7% in fiscal 2026, from 3-4% in the past two years. This is expected to be led by a recovery in the US market. “The US demand outlook is positive, led by an improving macro backdrop, especially for banking and retail, and supported by a low base.”

The top five companies added $1.5-2 billion in incremental revenues over the past two years against the historical average of $5 billion, it said.

However, the demand in Europe is weakening, “offsetting some of the upside from the US market,” HSBC said. “From a broader perspective, unlike the last three mega upcycles since 2009, we don’t see any powerful new business or tech drivers.”

Tech adoption of GenAI has been faster in 2024 compared to business GenAI and that’s a negative for Indian IT over the short term, the note said. “We expect business GenAI projects to pick up by next year.”

Global capability centres continue to grow and take market share from Indian IT, the note said. “But these gains are moderating.”

Rating Changes 

  • Upgraded Infosys Ltd. to ‘buy’ from ‘hold’ with a target price of Rs 2,120 per share, implying an upside of 10.3% from the previous close.

  • Upgraded LTIMindtree Ltd. to ‘buy’ from ‘hold’ with a target of Rs 6,970 apiece, a 9.3% upside potential.

  • Upgraded Wipro Ltd. to ‘hold’ from ‘reduce’ with a target of Rs 263, a downside of 11.7%.

  • Downgraded Tata Consultancy Services Ltd. to ‘hold’ from ‘buy’ with a target of Rs 4,540 per share, a 2.1% upside from the previous close.

  • Downgraded Tech Mahindra Ltd. to ‘reduce’ from ‘hold’ with a target of Rs 1,510 per share, a potential downside of 15.3% from the previous close.

  • Downgraded Coforge Ltd. to ‘hold’ from ‘buy’ with a target price of Rs 8,200 per share, a downside of 7.9% from previous close.

  • Upgraded Mphasis Ltd. to ‘buy’ from ‘hold’ with a target of Rs 3,600 apiece, a 17.9% upside potential.

  • Preferred picks: Infosys, LTI Mindtree, HCLT, and Mphasis.

Prevailing uncertainty about Generative AI, the likely continuation of global capability centre headwinds, the weak outlook in Europe are among the reasons for HSBC to make changes in ratings and targets.

. Read more on Markets by NDTV Profit.HSBC expects the industry growth to pick up to 6-7% in fiscal 2026, from 3-4% in the past two years.  Read MoreMarkets, Business, Notifications 

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