Brokerages Slash Indian IT by Up to 34% Ahead of TCS, with Real Focus on Managed Services Model
Kotak, ICICI Sec, Motilal Oswal, and JPMorgan have downgraded estimates for TCS, Infosys, HCL Tech, and Wipro in just four days, with price deflation linked to AI rising to 3.5% and the sector losing 46% of market value since 2024.
Between July 1 and July 4, five research firms cut estimates for the five largest Indian IT services companies, and the pattern of adjustments highlights what the market is pricing in. Motilal Oswal, in a note on July 1, projected that Infosys would lower the top end of its FY27 guidance by 50 basis points, and that HCLTech would cut its services projection by 100 basis points. ICICI Securities, on July 2, moved from Neutral to Negative on the sector and slashed price targets by up to 34%: TCS from Rs 2,800 to Rs 1,860, HCL Tech from Rs 1,370 to Rs 910, Infosys from Rs 1,300 to Rs 950, and Wipro from Rs 200 to Rs 156. Kotak Institutional Equities, on July 3, reduced revenue estimates for FY27-29 by up to 1% and the fair value of the stocks by 2% to 21%, and raised its price deflation assumption linked to generative AI in managed services contracts to 3% to 3.5%. JPMorgan downgraded HCL Tech, Wipro, and Tata Technologies to Underweight.
The cumulative effect became evident on Friday. According to a BusinessToday survey from July 4, the combined market value of TCS, Wipro, Infosys, HCL Tech, and Tech Mahindra fell by 46% from the peak in August 2024, from Rs 33.71 lakh crore to Rs 18.15 lakh crore. Infosys is trading at half its record high of Rs 2,006.45 from December 2024, and Wipro has declined by 54% from its peak of Rs 369.93 in October 2021.
What is Being Repriced
The change in reading is not the estimate cuts themselves but the variable that has begun to drive the discount. Until 2024, the sector was struggling primarily due to macroeconomic pressures, especially from restrained discretionary spending in BFSI and telecom in the United States and the United Kingdom. In July 2026, Kotak identified AI as an explicit factor, raising the assumption of mandatory productivity pass-through in managed services contracts to 3.5%, which has consistently been the predictable revenue floor for these companies. ICICI characterized the decline as a "single-digit" recurring rate for the next cycle, from FY24 to FY28. This is an embedded discount rate, not a one-time shock.
Motilal Oswal provides the counterpoint that global C-level executives should keep in mind. The firm still sees BFSI as resilient, with stable deal ramp-ups, and the weakness in manufacturing is confined to automotive and industrial sectors. The thesis of cannibalization by AI coexists with verticals that still pay full price. TCS will announce FY27 results on Thursday, July 9, with consensus growth close to zero in constant currency and a robust TCV in the pipeline.
The Read-Across that Matters
The news is Indian in its context, but the audience is global. The five players generate close to $100 billion in aggregate revenue and are the dominant suppliers of application management, testing, and infrastructure operations contracts for mid-sized banks in the United States and the United Kingdom. If Kotak is correct and the discount for GenAI stabilizes at 3.5% per year, the impact on the operational costs of these buyers is substantial, with annual efficiency gains of between $6 billion and $8 billion projected by 2028, distributed among tier 2 banks, regional insurers, and omnichannel retailers.
On the other side of the table, India is facing the inverse. TCS cut 23,460 jobs in FY26, the largest net reduction among major Indian firms, and Infosys drastically reduced trainee onboarding. Cities like Bangalore, Hyderabad, and Pune, whose local economies depend on IT services in a manner comparable to Curitiba and Barueri’s dependence on shared services and BPO in Brazil, are undergoing simultaneous adjustment. The Philippines, the third largest BPO hub in the world with annual revenue exceeding $40 billion, is experiencing similar pressure as it migrates towards automated contact center accounts.
The Distinction Already Made by Wall Street and the Big 4, but Not Yet in India
This outlet's series on Morgan Stanley and JPMorgan showcased banks spending billions on AI while cutting headcount, and pieces on BCG and McKinsey revealed consulting firms doing the same in support functions. Indian IT services is now entering the same equation, but with a structural difference: banks and consultancies capture some productivity in margins, while the Indian vendor hired in a pyramid structure to resell human hours, and each autonomous agent in production replaces the base of the pyramid before reaching the top. Those purchasing from these vendors in the next 24 months need to negotiate today the minimum productivity pass-through and the ceiling on exposure to risks of autonomous agents in SLAs. If this clause is not included in the MSA, the savings will carry over to the next renewal or to another supplier.