Indian IT stocks have witnessed a sharp correction following the launch of advanced Claude Cowork Agentic AI plugins in February 2026. The Nifty IT Index has declined more than 21% on a year-to-date (YTD) basis and is currently trading at around 15.4x two-year forward earnings, broadly in line with the Nifty 50. This compares with its long-term average premium of about 17% over the benchmark index.
According to ICICI Securities, the launch of advanced AI agents is unlikely to upend IT delivery models overnight, but the advancement in AI agents inflates the risk of AI-led revenue deflation. The correction in valuations captures the structural AI headwinds leading to prolonged subdued growth for the industry.
Street already models subdued revenue growth for the IT sector during FY27–28E. As AI-driven productivity gains are currently offset by new work volumes, earnings downgrade risk appears minimal.
The CY26 revenue guidance of global technology services companies – with organic revenue growth for CY26 similar to CY25 – also suggests a stable demand environment, according to ICICI Securities.
“IT companies are remodelling their businesses, reflecting in the increased share of fixed-price contracts, improving profitability per employee, infusing AI in their proprietary solutions and platforms, forging partnerships with AInative players, hiring AI skilled talent at premium rates and talent re-skilling and restructuring (talent is becoming fungible),” said ICICI Securities.
It expects a stable demand environment with continued subdued constant currency (CC) revenue growth of 3% – 6% YoY for the IT Services industry for FY27E, better than FY26 but still lower than long-term average of 7% – 8% YoY in dollar terms. CY26 organic revenue guidance of global tech services companies implies stable near-term demand.
IT Stocks to Buy
ICICI Securities cut its target multiples for the IT stocks under its coverage by 20% to align with its pre-COVID-19 averages. It trimmed revenue growth forecasts to bake in higher AI-led revenue deflation; while its EPS estimates cut is lower with support from sharp rupee depreciation.
The brokerage firm sees limited downside risks to near-term earnings. With the now priced-in structural AI headwinds, ICICI Securities upgraded its stance on the IT sector to ‘Neutral’. “Even so, the timing of revenue inflection, driven by enterprise-wide AI adoption, remains clouded,” it said.
The brokerage house prefers mid-cap IT stocks over large-cap IT stocks because it believes that mid-caps are better placed to quickly remodel their business and compete with incumbents in large multi-service line deals leveraging AI.
Among mid-caps, it prefers Coforge, Mphasis, Hexaware Technologies and Latent View Analytics.
ICICI Securities upgraded its rating on Coforge shares to ‘Buy’, from ‘Hold’, and Mphasis shares to ‘Buy’ from ‘Add’, based on their attractive valuations and healthy revenue growth visibility showing in the resilient revenue growth momentum, deal bookings and management’s commentary on deal pipeline.
It cut Coforge share price target to ₹1,430 apiece from ₹1,710 earlier, and reduced Mphasis share price target to ₹2,500 from ₹3,140 earlier.
The brokerage firm upgraded its rating on LTIMindtree to ‘Hold’ from ‘Reduce’, and cut the target price to ₹4,490 from ₹5,460 earlier.
Here are the target price and rating changes:
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