The IT index underperformed the benchmark Nifty 50 significantly in 2025. While the benchmark index rose 10.51%, the Nifty IT index dropped 12.6% last year.
Most major IT companies, including TCS, HCL Tech, and Infosys, suffered losses in double digits in 2025. However, after the recent correction, several experts have started spotting value emerging in the sectors.
Seema Srivastava, Senior Research Analyst at SMC Global Securities, anticipates a transition in the IT sector from a cyclical recovery to a structural growth phase in FY26, driven primarily by AI-led transformation.
“Large Indian IT companies such as TCS, Infosys, HCL Tech, Wipro, LTIMindtree and Tech Mahindra are experiencing a meaningful improvement in deal quality, with nearly three-fourths of new contract wins now linked to AI-led services, including generative AI, agentic workflows, machine learning, analytics and intelligent automation,” said Srivastava.
Srivastava underlined that this shift signals a clear exit from the demand slowdown of recent years and improves revenue visibility, making large IT players attractive core portfolio holdings for investors seeking stability, strong cash flows and balance-sheet strength.
Srivastava said that while global macro uncertainty, geopolitical risks and cautious enterprise IT spending may continue to limit discretionary demand in traditional services, sustained investments in AI, cloud migration, data platforms and cybersecurity support earnings resilience and gradual margin expansion.
“Growth for Indian IT services is expected to improve to the mid- to high-single-digit range over FY26–FY27, aided by AI-led deal ramp-ups and vendor consolidation, while India’s overall IT spending is projected to exceed $176 billion in 2026, benefiting large incumbents with scale and execution capability,” said Srivastava.
Ajit Mishra, SVP of Research at Religare Broking, highlighted that after a prolonged period of global uncertainty, sentiment is turning more optimistic as expectations of Federal Reserve rate cuts and rapid AI adoption begin to influence client spending decisions.
Mishra underlined that while recent financial performance has remained stable, a consistent pipeline of cloud, data, and AI-led deal wins indicates that demand is gradually reviving.
“Management commentary across leading IT companies suggests that the recovery is likely to gather momentum by mid-FY26 and strengthen further into FY27 as discretionary technology budgets reopen,” said Mishra.
IT stocks to buy
According to Mishra, the Indian IT sector now appears to be at the beginning of a new, more disciplined, AI-driven growth cycle. Firms that invest decisively in innovation, talent, and high-value digital capabilities will be best positioned to lead the sector’s next phase of growth.
Among the IT key players, Mishra said HCL Tech and Tech Mahindra are promising in the short term.
Prashanth Tapse, Senior VP (Research) at Mehta Equities, suggests Coforge as a mid-cap pick. Among the large-cap companies, he suggests Infosys.
However, he prefers recommending the Nifty IT ETF rather than individual stocks.
“Sector rotation has been very sharp, and IT stocks tend to correct suddenly even when there is no change in fundamentals,” Tapse said.
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Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
