IT stocks shine amid volatility; Bernstein signals growth upcycle led by BFSI, AI-related deals

Over the past month, the Nifty IT index has climbed nearly 5 percent

IT stocks regained investor attention on November 27 after a brief pause, with shares of Infosys, HCL Tech, Wipro, LTIMindtree, and Tech Mahindra gaining up to 1 percent in a largely rangebound market. In a recent report, analysts at Bernstein noted the emergence of an upcycle in the sector, driven by recovering growth and the scaling of BFSI and AI-related deals.

Bernstein anticipates IT sector growth to be primarily driven by robust order books and reduced inefficiencies. “FY26 is expected to be a normalised growth year, building on the momentum from H2FY25. In this context, we favor companies with a strong BFSI mix, as they benefit from deeper customer relationships and greater margin resilience. Among large caps, Infosys and TCS are preferred for their substantial exposure to the US market (50-60 percent),” the firm stated.

In the mid- and small-cap segment, Bernstein highlighted specialised software players like Persistent Systems, which derives 80 percent of its revenue from the US to be a strong beneficiary of growth upcycle. They project high-teens growth for this IT services stock in this space over the medium term.

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Over the past month, the Nifty IT index has climbed nearly 5 percent, outperforming the benchmark Nifty 50, which has remained flat-to-negative during the same period. Among individual performers, shares of TCS, HCL Tech, Wipro, Tech Mahindra, and LTIMindtree have risen by 2-8 percent during this time.

In the recently concluded September quarter, some IT companies revised their revenue guidance upwards, while margin guidance remained unchanged. Growth was primarily fueled by the manufacturing and energy & utilities sectors, with the BFSI vertical showing early signs of recovery.

However, mega deals have been notably absent in FY25, leading to a 0.35 percent year-on-year decline in total contract value (TCV) reported by the top five IT firms in H1, according to analysts at JM Financial. For FY26, analysts expect growth acceleration to rely on a rebound in short-cycle and discretionary deals.

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