Citi Cuts IT Targets After 19% Nifty IT Fall, Backs Infosys and HCL Tech

The Nifty IT index has corrected 19 percent calendar year to date, underperforming the Nifty by 16 percent so far this calendar year.

Brokerage firm Citi said investors are raising several common questions. It said enterprises will need support in implementing AI, which should benefit IT services firms. It also flagged concerns on what is driving the sharp correction if IT services remain relevant. Citi noted that valuations and free cash flow yields appear reasonable. However, it added that Indian IT stocks continue to trade at a premium to global peers.

Despite these arguments, Citi said it has cut target multiples to factor in higher risks to medium term growth and terminal growth assumptions. This has led to target price reductions of 14 to 29 percent.

The brokerage maintained a cautious stance on the sector. It said it continues to prefer Infosys and HCL Technologies among large cap names.

Separately, CLSA in a note on the IT sector highlighted commentary from Salesforce. The company reported organic revenue growth of about 8.5 percent for FY26 and guided for 7 to 8 percent organic growth in FY27, implying moderation.

In contrast, IT services companies such as Cognizant, Capgemini and EPAM Systems have guided for stronger growth next year.

CLSA said this divergence suggests AI is creating a net positive volume opportunity for system integrators, with clients preferring build over buy and benefiting from lower production costs. It said this dynamic could allow system integrators to gain share from SaaS providers.

Within its coverage universe, CLSA sees Persistent Systems as having the highest exposure to Salesforce, while Infosys leads in Salesforce related expertise.

The brokerage reiterated its high conviction outperform rating on Persistent and its outperform rating on Infosys.