JM Financial’s latest coverage on the Indian IT services segment starts with a stark 4.1% constant‑currency revenue growth forecast for FY28, up from 3.5% in FY27, signalling a modest rebound after four years of softness.
The brokerage tags Tech Mahindra as an ‘Overweight’ play, lifting its target price to ₹1,680 while trimming Wipro’s to ₹1,120 amid concerns over pricing pressure and margin compression.
In a market context, the NSE IT index has lagged the Nifty by roughly 12% year‑to‑date, a gap that underlines the sector’s struggle to keep pace with broader market momentum.
JM Financial points to a 7% depreciation of the rupee in FY27, estimating a 100‑120 basis‑point boost to margins—an effect that could temporarily mask organic margin declines.
The firm warns that any rupee stabilization or appreciation, coupled with intensified competition, would erode that cushion and could force a re‑assessment of consensus margin figures.
Looking forward, JM Financial maintains its selective approach, favouring vendors that can prioritize growth over margins in the current environment, while keeping a tight eye on AI‑driven productivity impacts.
The sector’s next milestone is the upcoming earnings season, where firms like Infosys, Tech Mahindra and Wipro will report results that could validate or challenge JM Financial’s optimistic 4.1% revenue growth projection.
Investors should note that the firm’s updated ratings also highlight Sagility and Mphasis as potential upside plays, suggesting a broader diversification strategy beyond the flagship names.
Analysts expect that the AI adoption curve, still in its scaling phase, will gradually lift enterprise spend and could offset the near‑term productivity‑led revenue deflation the brokerage has flagged.
The key takeaway for traders remains the 4.1% revenue growth target and the 100‑120 basis‑point margin benefit, both of which set the stage for a cautious yet opportunistic play on Tech Mahindra and its sector peers.