TCS and Tech Mahindra, two Indian IT giants, have had a good day in the market today after a 10-session losing streak. The companies received an upgrade to “Buy” from Kotak Institutional Equities, a leading brokerage firm. This upgrade comes after a sharp correction in the Indian IT sector, which has seen prices fall by as much as 21% in the past month. According to Kotak Institutional Equities, the correction presents an attractive entry point for investors.
The firm has also revised its growth prospects for FY2026, expecting a moderate growth rate of 1.8-6.8%, compared to a decline of -2.1% to 4.4% in FY2025. The growth is expected to be driven by a gradual recovery in discretionary spending, regulatory-driven IT investments, and early signs of improvement in the retail sector. However, other sectors such as healthcare, telecom, and manufacturing are expected to continue to see weak demand due to cost-cutting measures and macroeconomic uncertainties.
The brokerage also expects AI adoption to create opportunities for some players, with companies that have strong AI capabilities and diversified service offerings likely to emerge stronger. Despite an overall cautious outlook, Kotak Institutional Equities has identified selective investment opportunities in the Indian IT sector. The firm has cut its earnings estimates for IT companies by 1-5% and reduced fair values by 2-21%, reflecting the slower recovery expected in the sector.
TCS and Tech Mahindra, the two companies upgraded by Kotak Institutional Equities, have seen their valuations improve, making them attractive for investors. With a “Buy” rating, the brokerage firm is recommending these companies as a good investment option, citing their improved valuations and potential for recovery.