The Indian IT industry may have stopped falling, and analysts expect AI‑driven services to become the next big growth engine for investors.
Sector may have reached its low point
Research analyst Abhishek Pathak says the third‑quarter slowdown – caused by seasonal staffing cuts – is a short‑term issue. He believes the overall sector has likely bottomed out and is ready for a turnaround.
AI services expected to lift earnings from 2026
Pathak expects that by 2026, companies will move from spending on AI hardware to selling AI‑powered services. When pilot projects turn into full contracts, earnings should improve. He suggests watching for partnership announcements between Indian IT firms and AI leaders such as Anthropic as an early sign of this shift.
Large‑caps versus mid‑caps
While mid‑cap firms have outperformed large‑caps over the past five years, some large‑cap names now appear fairly valued. Pathak sees value in selective large‑caps alongside strong mid‑caps.
Key stock recommendations
- Infosys – Large‑cap, liked for its stable growth.
- HCL Technologies – Considered an “all‑weather” stock with a balanced portfolio.
- Coforge – Mid‑cap top pick, boosted by a $2.5 billion acquisition of an AI‑native firm.
- Mphasis – Mid‑cap, benefiting from strong new deals.
- Hexaware – Mid‑cap, positioned for a turnaround.
What to watch
Keep an eye on:
- Partnerships between Indian IT companies and leading AI firms.
- Progress on Coforge’s recent acquisition and any potential equity dilution.
- Quarterly earnings that show a shift from pilot AI projects to full‑scale services.
Disclaimer
Remember, this is perspective, not a prediction. Do your own research and consider your risk tolerance before making any investment decisions.