CLSA Puts Faith in Indian IT Stocks Amidst Q1 Earnings Missteps

CLSA remains bullish on Indian IT stocks despite a 18.1% decline in the Nifty IT index this year. The brokerage picked Infosys and Wipro as top choices, citing strong US growth and revival in discretionary spending. Companies like Tata Consultancy Services, Infosys, Wipro, and Tech Mahindra have strong capabilities built around the Nvidia ecosystem.

Despite a significant 18.1% decline in the Nifty IT index this year, CLSA remains bullish on Indian IT stocks. The brokerage has identified Infosys and Wipro as top choices, citing strong US growth and a revival in discretionary spending. This optimism is driven by the robust capabilities of companies like Tata Consultancy Services, Infosys, Wipro, and Tech Mahindra, which are built around the Nvidia ecosystem [1].

Wipro Limited (NYSE: WIT) has recently reported a mixed financial performance. The company's gross revenue for the quarter was ₹221.3 billion, down 1.6% quarter-over-quarter (QoQ) but up 0.8% year-over-year (YoY). Net income stood at ₹33.3 billion, down 6.7% QoQ but up 10.9% YoY. Total bookings for the quarter were at $4.971 billion, up 24.1% QoQ and 50.7% YoY in constant currency [2]. Despite these figures, Citi analyst Surendra Goyal maintained a Sell rating on Wipro, setting a price target of INR225. The company's shares closed at INR250.84 on Wednesday, following the announcement of a strategic acquisition [3].

The acquisition of the digital transformation solutions unit of U.S.-based audio products maker Harman for $375 million is expected to add approximately 3% to Wipro's revenue in the first year but may also dilute margins by 50-60 basis points [3]. The acquisition is expected to close by 31 December 2025 and will integrate over 5,600 DTS employees into Wipro's Engineering Global Business Line [3].

Tata Consultancy Services Limited (TCS), another major player in the Indian IT sector, has partnered with the Philippines-based Unilab for the cloud migration of core systems. TCS's net sales are primarily driven by IT services (99%), with significant contributions from the bank-financial services-insurance (40%), telecoms and media (16.5%), retail and distribution (15.6%), manufacturing industry (9.7%), and other sectors (18.2%) [4].

The financial performance of these companies remains consistent, with Wipro reporting a debt-to-equity ratio of 0.20 and a return on equity (ROE) of 15.94% for the period ending June 2025 [2]. Analyst consensus remains Hold with an average price target of INR259.14, while Goyal's success rate on recommended stocks is 73.91% [3].

References:
[1] https://www.ainvest.com/news/citi-downgrades-wipro-sell-sets-price-target-inr225-2508/
[2] https://www.marketscreener.com/news/tata-consultancy-services-partners-with-philippines-unilab-for-cloud-migration-of-core-systems-ce7c50dfd180ff26
[3] https://www.itweb.co.za/article/wipro-acquires-harmans-digital-transformation-solutions-business-unit-deepening-engineering-innovation-rd-excellence/nWJadvbNbKyvbjO1
[4] https://www.tradingview.com/news/reuters.com,2025:newsml_L4N3UE07T:0-wipro-gains-on-375-million-deal-with-jbl-maker-harman-s-indian-unit/