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Indian IT Stocks: Rally Continues Amidst Muted Growth?
22 Oct
Summary
- Indian IT stocks may see further valuation gains.
- Growth expectations for the sector remain muted.
- Infosys and TCS are identified for potential rerating.
Select Indian IT stocks may experience further valuation increases, even after a significant rally in October 2026. Despite a muted revenue growth outlook for the sector between FY26 and FY29, analysts from Jefferies believe that the absence of negative surprises could boost stock valuations. This is especially relevant amid potentially worsening sentiment regarding global AI capital expenditures.
Jefferies has raised target prices for Infosys and TCS by 14-18%, setting them at ₹1,160 and ₹2,125 respectively. However, they maintain a 'hold' rating on Infosys and an 'underperform' rating on TCS. The brokerage suggests that the sector's risk-reward becomes unfavorable beyond 17-18 times earnings. The worst-case scenario for IT companies involves stagnant growth beyond FY29, potentially leading to price-to-earnings ratios of 12-13 times.
