Jefferies is particularly bullish on the Indian IT sector, and has initiated a ‘buy’ call on Mphasis Ltd. with a target price of Rs 3,460 per share, implying a potential upside of 21% on the stock. The brokerage sees Mphasis as a prime beneficiary of the improving US economic conditions and growing demand in the Banking, Financial Services, and Insurance vertical.

With a projected 10% compound annual growth rate in constant currency revenue and 14% compound annual growth rate in earnings per share values over fiscals 2025 to 2027, the company’s growth outlook shines amid a still-recovering IT sector, the brokerage said. Jefferies highlights declining US rates as a driver for the mortgage segment, a key area for Mphasis.

Jefferies finds Mphasis’ valuation offering relative comfort at 30 times its price-to-earning ratio, thus leading to a compelling growth story.

Indian IT’s Path To Recovery

Jefferies’ broader sector view for 2025 points to a gradual recovery, supported by three major themes:

  • Reviving IT Budgets: After two years of subdued client spending, IT budgets are set to see a moderate uptick as enterprises prioritise modernisation, particularly in AI and cloud spaces, says Jefferies.

  • Long-Term Demand Drivers: Cloud services (11.6% CAGR through 2024 to 2028), AI services (18% CAGR), and offshoring trends will continue to propel the sector’s structural growth, as per the note.

  • Cost Discipline: With fewer margin levers available, firms are doubling down on operational efficiencies, from reducing wage hikes to optimising employee pyramids. Margins are projected to expand by 50 basis points in fiscal 2026, said the brokerage.

It has issued ‘buy’ ratings for Infosys Ltd., Tata Consultancy Services Ltd., Coforge Ltd., Sagility India Ltd., and LTIMindtree Ltd., while maintaining a ‘hold’ on HCL Technologies and an ‘underperform’ on Tech Mahindra Ltd. and Wipro Ltd.

Jefferies recommends sticking with IT players offering strong exposure to North America and BFSI, noting these firms are better placed to deliver consistent double-digit EPS growth.

. Read more on Markets by NDTV Profit.Among large-caps, Infosys, TCS, and LTIMindtree are Jefferies’ top choices, with the latter upgraded to ‘buy’ following recent price corrections.  Read MoreMarkets, Business, Notifications 

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