Short call | Nifty IT hits 6-month low: time to reconsider or steer clear? Bharti Airtel, Zomato in focus

Short call weaves niche topics on equity markets and news developments around stocks

As the Nifty IT index slumps to a 6-month low, investors are left questioning whether the sector is still worth considering for long-term stability. Mounting concerns—ranging from uncertainty over US trade policies to fears of stagflation and a cautious outlook from Capgemini—are weighing heavily on sentiment.

Adding to the pressure, InCred Equities recently downgraded the IT sector from Overweight to Neutral, citing risks from the ongoing trade war and DeepSeek challenges. Meanwhile, a sharp drop in US consumer sentiment to a 15-month low in February has raised fresh red flags. Persistent inflation in the US suggests that interest rates may remain elevated for longer, dampening corporate spending and slowing IT demand.

The recently concluded third quarter reflected this cautious environment, with the IT sector posting subdued aggregate growth in what is typically a seasonally weak period. Interestingly, mid-cap IT firms outperformed large caps, driven by stronger revenue momentum. While some companies noted a recovery in discretionary spending and an increase in short-cycle deals, overall demand remains fragile.

Kotak Institutional Equities pointed out that growth normalisation in IT remains elusive, recommending a balanced approach to investing in the sector. They favor established industry giants like Infosys and TCS, alongside mid-cap challengers such as Coforge and Persistent Systems, which are exhibiting stronger growth trends.

Looking ahead, the sector's growth is expected to improve from 4-4.5 percent in FY25 to 6.5-7 percent in FY26, but this recovery won’t be uniform. Companies with exposure to high-value deals and resilient revenue verticals are likely to fare better than others, according to analysts.

The big question now—is this downturn a temporary setback or a sign that IT stocks have lost their edge in a changing macroeconomic landscape? While growth may improve, the sector still faces multiple headwinds.

Bharti Airtel (Rs 1,638.45, 2.3%)

Goldman Sachs retained bullishness, increasing its target price.

Bull Case: Goldman Sachs bumped its target price for Bharti Airtel by 5 percent to Rs 1,780 from Rs 1,700, citing stronger revenue growth and better-than-expected earnings momentum. The brokerage sees a further upside of around 9.2 percent from current levels, driven by improved broadband subscriber growth and rising margins in the wireless business. It also pointed to Bharti’s disciplined capital expenditure and a strategic shift towards higher-margin segments as key positives.

Bear Case: Increased competition may affect pricing power, which may lead to lower revenue growth and sub-optimal margins. In addition, high capex and absence of meaningful tariff hikes could strain the balance sheet.

Zomato (Rs 225 | +1.3%)

Bernstein maintains 'Outperform' rating, target price at Rs 310

Bull case: Zomato is well-positioned to dominate the quick commerce space with a balanced approach to growth and profitability. As competition stabilizes and Swiggy struggles with lower margins, Zomato’s strong market presence and strategic expansion could drive sustained revenue growth, making Bernstein’s Rs 310 target price achievable.

Bear case: Rising competition from Swiggy and Zepto could lead to aggressive discounting and higher marketing spends, eroding margins and delaying profitability. If the quick commerce battle intensifies beyond expectations, Zomato’s leadership position may come under threat, pressuring both its stock price and long-term growth trajectory.

(with input from Zoya)