Citi Trims Targets on 10 IT Stocks Amid Weak Growth Outlook

Citigroup has issued a "red alert" for the Indian IT sector, slashing target prices for 10 stocks including Infosys, TCS, and Coforge amid weak growth prospects and valuation pressures.

In a note dated around August 2025 but reflecting ongoing sector challenges into 2026, Citi cut TCS's target to Rs 2,850 from Rs 3,135 at 20x FY27 earnings, maintaining a 'Sell' rating due to muted growth. Infosys saw reductions in related broker notes, with CLSA trimming to Rs 1,653 from Rs 1,779 and Jefferies to Rs 1,290 from Rs 1,880, citing AI disruptions and macro slowdowns. Coforge's target fell to Rs 1,530 from Rs 1,675 at 33x FY27 earnings, with 'Sell' reiterated; others like L&T Technology Services dropped to Rs 3,735 from Rs 4,015.

The revisions stem from lowered valuation multiples amid investor caution on earnings growth for FY25-28, minor currency adjustments, and AI reshaping business models without clear market share gains. Brokerages like CLSA and Jefferies echo this, preferring niche players like Coforge in select cases but downgrading heavyweights TCS, HCL Tech, and Wipro.

Also Read: Quantum's War Play: Hike Energy, Gold; Slash Dollars, Go Asia Equities

This comes as markets grapple with the US-Iran war, prompting Quantum's portfolio rebalance to energy, gold, and Asian equities over IT amid oil spikes and volatility. India's IT firms face headwinds from client spending cuts in a risk-off environment fueled by strikes killing Khamenei's death and Gulf tensions.

PM Modi's CCS meeting addressed West Asia risks, while US advisories hit Bahrain and Qatar, indirectly pressuring global outsourcing demand. Citi's stance signals caution for FY27 outlooks.

Investors should watch Q4 earnings and AI adoption; Hexaware retains a 'Buy' at Rs 860 despite cuts, as the only positive outlier. Sector derating up to 65% is possible per Jefferies if growth disappoints further.

Also Read: Sensex, Nifty Likely to Open Weak as Oil Prices Spike