
The June quarter earnings could be muted for domestic IT firms, but not as bad as the market was fearing earlier. Stock analysts tracking the sector said macro conditions have remained stable since March 2025, and most firms are expected to post in-line results. Tier-2 companies should continue to outperform, with majority seeing sequential revenue growth, while four of five Tier-1 players may report sequential declines, they said.
Analysts have turned selective on IT stocks following the recent rally. They in fact cut ratings for a handful of stocks, ahead of quarterly results.
Nomura India's top picks included Infosys (in large caps; Buy), Coforge (in midcaps; Buy) and eClerx (in smallcaps; Buy).
"We prefer TCS and Mphasis – their valuations being comfortable, supported by healthy fundamentals. We also prefer Sagility and IKS Health in Healthtech space and LatentView in data analytics. We maintain our negative stance on the ER&D pack, as we expect challenges in auto and communication vertical to continue in the near term," said ICICI Securities.
MOFSL said there is a chance to look at more "risk-on" stocks now, with an improving deal outlook and good vertical exposures. Its top picks in the largecap space remain HCL Technologies and Tech Mahindra. HCL Tecnologies benefits from its all-weather business mix, which should support growth in the current environment, it said adding that it may turn constructive on Infosys if its forthcoming guidance meaningfully improves and deal wins pick up.
"In mid-caps, Coforge remains our top pick, and we also like LTIMindtree in an improving environment. Mphasis recent strong TCV wins and healthy conversion trends lend confidence to the near-term momentum. A material improvement in its deal TCV outlook could prompt us to upgrade our rating on the stock," MOFSL said.
Recent IT stock rallies have stretched valuations, leaving little near-term headroom, PL Capital said.
"We continue to remain positive on TCS, Infosys, Persistent Systems and Mphasis, which are either less sensitive to discretionary spending or have low exposure to tariff-sensitive verticals. However, given the stock price rally and limited upside potential, we are downgrading Infosys to Accumulate (from Buy earlier) and Mphasis/Persistent to Hold(from Buy earlier)," PL Capital said.
Kotak Institutional Equities said Coforge should lead the revenue growth, followed by Persistent Systems, Hexaware Technologies and Mphasis. TCS, Wipro and ERD names will likely face cuts in EPS after results, it warned.
Among IT names, Kotak's top picks included Infosys, Tech Mahindra, Hexaware, Coforge and Indegene.
The 1-year forward PE multiples of Tier I and II companies are trading at 25 times and 33 times, respectively, which is premium to their 10-year average PE
Nuvama believes tech spends cannot be held back for much longer, irrespective of the tariff war outcome. It sees a recovery in tech spends soon, leading to handsome returns for investors over the medium to long term.
"In the near term, volatility might persist with a rapidly changing macro environment. We stay positive on select Tier-1 (TCS, Infosys and HCL Tech) and most Tier-2 names (Coforge, Persistent, Mphasis and LTIMindtree)," it said.