TCS, Infosys Q3 results due next week; here is what Jefferies expects from the IT sector

IT stocks: While Jefferies has maintained a 'buy' call on Coforge and Infosys each, it has upgraded LTIMindtree to 'buy' from 'hold'.

IT stocks: The brokerage has kept a hold rating on TCS, HCL Technologies. Moreover, Wipro and Tech Mahindra fell under the underperform rating by the brokerage.Image: Freepik/ Representational Image

IT stocks: Tata Consultancy Services (TCS), the country's largest IT company, is all set to kick off the corporate earnings season for India Inc on January 11. Infosys, the second largest, will also report its financial results for the October-December period on the same day. As investors await the onset of the Q3 results season, Jefferies has shared its stance on IT companies.

The brokerage has maintained a 'buy' call each on Coforge and Infosys, and upgraded LTIMindtree to 'buy' from 'hold'. It has kept a 'hold' rating each on TCS and HCL Technologies, and an 'underperform' each on Wipro and Tech Mahindra.

What Jefferies makes of the IT sector now

In FY25, Jefferies expects continued focus on RoI by clients to result in a gradual pickup in growth to a year-on-year 6 per cent in constant currency.

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A recovery in demand in CY25 will be key to avoiding a price-to-earnings (PE) derating, analysts at the brokerage wrote in a note ahead of the Q3 results.

Top picks

Jefferies has Infosys, Coforge and LTIMindtree (LTIM) as its top picks in the space citing strong growth visibility.

LTIMindtree share price target

Jefferies has double upgraded the counter to buy from hold, The brokerage has raised the target by Rs 1,255 to Rs 6,830 from Rs 5,575 earlier.

TCS share price target

Jefferies has maintained a hold call on the tech giant, The target has been raised to Rs 4,000 from Rs 3,690 by the brokerage.

Tech Mahindra share price target

Jefferies has maintained an underperform rating on the counter with a raised target of Rs 1,100 from Rs 910 earlier.

HCL Tech share price target

Jefferies has continued a hold call with a target raise to Rs 1,500 from Rs 1,240

Infosys share price target

Jefferies has maintained a buy call on country’s second largest IT service provider with a raise in target to Rs 1,720 from Rs 1,650.

Wipro share price target

The brokerage has kept an underperform rating on Wipro, The target has been raised to Rs 385 fom Rs 345 by the brokerage.

Coforge share price target

Jefferies has a 'buy' call on the counter and raised its target for the stock to Rs 7,000 from Rs 6,580.

What JPMorgan makes of the IT sector

JPMorgan has a ‘neutral’ stance on the IT sector, citing the following five themes prevalent in the space:

Pivot to cost saving
Declining drags from laggard industries
Pro-cyclicality
New-term Gen AI preparatory work
Low base in CY 2023

Citi, however, is bearish on the space. Read more

How IT space has fared on Dalal Street

The Nifty IT index—whose 10 constituents include Infosys, TCS, Coforge and LTIMindtree—gained over 20 per cent in the last year, in line with a 20 per cent rise in the headline Nifty50 index, its best yearly return in two years.

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