Major Target Price Revisions
Key target price cuts include Infosys, down to Rs 1,440 from Rs 1,700; TCS, reduced to Rs 2,500 from Rs 3,020; and HCL Technologies, lowered to Rs 1,460 from Rs 1,700. Midcap and smaller IT firms were also affected, with LTIMindtree’s target cut to Rs 4,190 from Rs 5,415, Persistent Systems down to Rs 4,170 from Rs 5,455, and Coforge reduced to Rs 1,100 from Rs 1,560.
Other revisions include Tech Mahindra to Rs 1,260 from Rs 1,500, Wipro to Rs 185 from Rs 235, Hexaware to Rs 475 from Rs 625, and Mphasis down to Rs 2,335 from Rs 2,905. Despite broad-based cuts, Citi continues to rank Infosys and HCL Technologies relatively higher within its coverage.
AI Optimism Meets Near-Term Concerns
While the potential for AI-driven IT services remains a growth opportunity, Citi highlighted near-term challenges. Execution cycles for discretionary projects are lengthening, delivery productivity gains are impacting margins, and continued industry fragmentation limits visibility into demand trends.
The brokerage emphasized that medium- and long-term stock returns will largely depend on actual revenue growth and margin performance, rather than valuation alone. Adjustments to terminal growth expectations and market multiples drove much of the target price revisions.
Valuation Adjustments and Market Outlook
Following the recent sell-off, forward P/E multiples for Nifty IT stocks have moderated to around 25-26x, down from 30-31x earlier this year. Citi notes that while valuations are more reasonable post-correction, sustainable stock performance requires stronger growth support.
Indian IT firms continue to trade at a narrower discount to global peers, supported by domestic institutional ownership and limited direct AI displacement risks. However, sustaining premiums will remain difficult if revenue growth slows further.
Investor Takeaways
Investors are advised to exercise caution, particularly in discretionary “build” projects, and monitor companies’ AI integration strategies and execution efficiencies. Citi’s guidance reflects a preference for more attractive entry points rather than immediate market participation..
