HDFC Securities has maintained a selective positive view on Indian information technology stocks ahead of the second-quarter earnings season, even as it expects another relatively weak quarter for the sector.
Among the stocks offering the strongest potential upside from the brokerage’s reference prices are Mphasis, Larsen & Toubro Technology Services, Infosys and Tata Consultancy Services, with indicated upside ranging from about 20% to 32%.
The recommendations come from HDFC Securities’ Q2 FY27 IT sector preview dated October 1, 2026. The brokerage expects muted near-term growth as clients remain cautious on discretionary technology spending, while pricing pressure and longer decision-making cycles continue to weigh on the industry.
Mphasis: Target Price ₹2,840
Mphasis carries the highest indicated upside among the four.
HDFC Securities has set a target price of ₹2,840, implying roughly 32% upside from the market price used in the brokerage’s analysis. The stock carries an ADD rating.
The company is part of India’s mid-sized IT services segment, which HDFC Securities expects to perform better than large-cap peers during the quarter.
The brokerage expects mid-sized IT companies to report sequential growth ranging from about 0.6% to 6.3%, although part of that growth may come from acquisitions rather than purely organic demand.
Mphasis has exposure to banking, financial services and digital transformation work, making client technology budgets and discretionary spending important factors for its growth outlook.
L&T Technology Services: Target Price ₹5,270
L&T Technology Services, or LTTS, is another stock where HDFC Securities sees substantial upside.
The brokerage has maintained a BUY rating and set a revised target price of ₹5,270, representing around 30% upside from the reference price.
LTTS operates primarily in engineering research and development services rather than traditional IT outsourcing.
Its business spans areas including automotive, industrial technology, telecom, healthcare engineering and digital manufacturing.
Engineering services companies can benefit from long-term spending on product development and digitalization, but they are also exposed to delays in customer investment when global economic conditions weaken.
HDFC Securities’ broader sector view remains cautious despite the stock-specific upside.
Infosys: Target Price ₹1,250
Infosys has a target price of ₹1,250, implying approximately 26% upside, according to the brokerage.
HDFC Securities has retained a BUY rating on the stock.
The recommendation comes even as the brokerage expects a subdued second quarter for large Indian IT companies.
For Tier-1 firms, HDFC Securities projects sequential growth ranging from a 0.4% decline to around 2% growth, reflecting continued caution among enterprise clients.
The brokerage said discretionary technology spending remains weak, while customers are taking longer to approve new projects.
AI is also beginning to affect commercial negotiations, with some clients seeking to capture productivity improvements through lower pricing.
TCS: Target Price ₹2,470
Tata Consultancy Services has been assigned a target price of ₹2,470, representing about 20% potential upside from the reference price used by HDFC Securities.
The brokerage has an ADD rating on TCS.
TCS remains the largest company in India’s IT services industry and will be closely watched as the Q2 earnings season begins.
The company’s results are likely to provide an early indication of enterprise technology demand, deal conversion, pricing conditions and spending trends across major international markets.
The second quarter is traditionally considered seasonally stronger for Indian IT companies, but HDFC Securities does not expect that normal pattern to translate into strong growth this year.
Why HDFC Securities Is Still Selectively Positive
The brokerage’s stock recommendations may appear unusual given its cautious earnings outlook.
But the investment case is partly based on valuation.
HDFC Securities said IT sector valuations have fallen close to historical lows in several cases, while free cash flow yields remain attractive.
The brokerage has nevertheless become more conservative in its estimates.
It has reduced revenue forecasts for FY27 to FY29 by roughly 0.4% to 0.6%, lowered valuation multiples by around one to two times for some companies and shifted its valuation framework to September 2028 earnings.
That suggests the brokerage is not forecasting an immediate sector-wide recovery.
Instead, it sees selected stocks as attractive after their valuations declined.
Q2 Growth Is Expected to Remain Weak
HDFC Securities’ official institutional research page describes the upcoming quarter as another muted one for Indian IT, despite Q2 normally being a seasonally stronger period.
The brokerage identified several pressures facing the industry.
New deal activity remains weak, customer decision cycles are taking longer and discretionary spending continues to face pressure from economic uncertainty.
Pricing is another concern.
As artificial intelligence tools improve productivity, customers are increasingly asking technology providers to share some of those efficiency gains through lower costs.
That could limit revenue growth even as AI-related work itself creates new opportunities.
Recovery May Depend on the Second Half
With the first half of FY27 likely to remain softer than originally expected, HDFC Securities believes the sector will need stronger performance in the second half to improve the full-year outlook.
There is another complication: the third quarter is typically affected by seasonal furloughs, particularly among clients in Western markets.
That means a meaningful industry recovery may not be straightforward even if deal activity begins to improve.
For investors, the Q2 earnings season will therefore be important not only for reported revenue and profit but also for management commentary on customer spending, project pipelines and demand for AI-related services.
Other IT Stocks Also Covered
HDFC Securities’ Q2 preview is broader than these four names.
The brokerage has also assigned targets including ₹1,370 for HCL Technologies, ₹185 for Wipro, ₹1,660 for Tech Mahindra and ₹6,070 for Persistent Systems.
Their indicated upside in the current report is lower than the four names highlighted above.
Persistent Systems, for example, carries about 15% potential upside, while Wipro is around 17%, HCL Technologies roughly 11% and Tech Mahindra around 9%, based on the reference prices used in the report.
This is why the “four stocks” framing should be understood as a shortlist of stronger upside opportunities rather than the entirety of HDFC Securities’ IT coverage.
Brokerage Targets Are Not Guaranteed Returns
Target prices depend on assumptions about earnings, margins, deal wins, valuations and economic conditions.
If those assumptions change, brokerages can revise both their ratings and target prices.
The quoted upside percentages also depend on the market prices used when the report was prepared. If a stock rises or falls afterward, the potential upside changes automatically.
Investors should therefore treat brokerage recommendations as research opinions rather than predictions of guaranteed returns.
Conclusion
HDFC Securities remains cautious on the near-term outlook for India’s IT services sector, but it sees attractive valuations in selected stocks ahead of Q2 FY27 earnings.
Among the stronger opportunities highlighted in its current research, Mphasis carries a ₹2,840 target with around 32% upside, LTTS has a ₹5,270 target with about 30% upside, Infosys has a ₹1,250 target with roughly 26% upside, and TCS has a ₹2,470 target with around 20% upside.
The recommendations come despite expectations for muted sector growth, slow deal conversion and continued pressure on discretionary technology spending.
That makes the upcoming results season particularly important: investors will be watching not only the quarterly numbers, but also whether management teams see enough improvement in demand to support a stronger second half of FY27.
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