Infosys, Tech Mahindra, Mphasis Among Anand Rathi’s Top Picks Amid The IT Sector’s ‘Double Whammy’

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Anand Rathi Report

India’s IT sector is set for another subdued quarter, with brokerage firm Anand Rathi warning that the combined impact of the Middle-East conflict and AI-led deflation has emerged as a “double whammy” for the industry in Q1 FY27. The brokerage expects muted revenue growth across most technology companies, even as it remains constructive on select stocks with stronger execution, AI capabilities and deal momentum. 

Most top-six firms sit near flat (-1.0% to +1.8% QoQ constant currency; median ~0.3% vs 0.4% in Q4 FY26), with organic growth led by Tech Mahindra (~1%) among large caps and Persistent (~3%) among mid-caps (+0.6% QoQ cc for mid cap IT services vs 0.6% QoQ cc in Q4 FY26), as underlying weakness in manufacturing, US healthcare and the Middle East is masked by M&A and shifting deal ramps.

Margins remain pressured (Top-six median ~16.1% vs 16.9% in Q4 FY26; mid caps: 14.2% vs 15.5%) despite INR depreciation (-3.3% q/q), with wage hikes, AI-led pricing pass-through and acquisition amortisation offsetting the currency tailwind; Tech Mahindra and LTI Mindtree also book hedge losses, which will impact their PAT.

Valuations stay overhung by potential Anthropic/OpenAI IPOs, though we favor scaled, execution-focused ITplays tied to LLM and hyperscaler partnerships. On FY27e guidance, we expect Infosys, HCLT and HCLT services to raise FY27 growth guidance to 2-4% (vs. 1.5-3.5% earlier), 1.5-4.5% (vs. 1-4%) and 2-5% (1.5-4.5%) respectively, aided by the Optimum Healthcare buy (Infosys) and HCLT’s recent $1.14bn, 5-year megadeal win.

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