Nuvama Sees Up to 84% Upside Potential in Top-Ten IT Services Stocks

Nuvama Turns Bullish on Indian IT Services Stocks

Key Highlights

• Nuvama, a domestic brokerage, has turned bullish on Indian IT services stocks following the recent correction in the sector.
• The brokerage projects upside potential of up to 84% in select firms.

Industry Outlook

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The Indian IT services industry is not expected to face any major threats from the emergence of Generative Artificial Intelligence (Gen-AI). Nuvama believes that the industry will likely emerge stronger from the ongoing technological transition.

Valuations

The sharp correction in IT stocks over the past two months has made valuations attractive. Nuvama has assigned a 'buy' rating to all the top 10 IT services companies under its coverage and upgraded HCL Tech, Wipro, Tech Mahindra, and Hexaware to 'buy'.

Company Targets

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• Coforge: Target price of Rs 2,100, implying an upside of 84%
• Mphasis: Target price of Rs 3,100, indicating a 42% upside
• LTIMindtree: Target price of Rs 6,100, suggesting a 41% gain
• TCS: Target price of Rs 3,300, implying a 31% upside
• Persistent Systems: Target price of Rs 6,000, indicating a 26% gain
• Infosys: Target price of Rs 1,650, suggesting a 27% gain
• Tech Mahindra: Target price of Rs 1,650, indicating a 24% upside
• Hexaware: Target price of Rs 550, implying a 24% gain
• Wipro: Target price of Rs 240, indicating a 21% upside
• HCL Tech: Target price of Rs 1,550, suggesting a 14% gain

Historical Context

Similar concerns about disruption in the IT services industry have surfaced in the past during major global developments. Nuvama believes that even as companies increase automation of certain tasks, enterprises will continue to require organisations that can take ownership of systems and manage integration of technologies.