Why Indian Midcap IT Stocks Are Set to Dominate in the GenAI Era

The Indian IT services sector is undergoing a seismic shift. While the Big Four—TCS, Infosys, Wipro, and HCL—struggle with GenAI adoption inertia and leadership churn, midcap firms like Coforge, Persistent Systems, and Hexaware are emerging as the disruptors of choice. These companies are leveraging agile GenAI integration, leadership stability, and specialized client focus to capture market share at an accelerating pace. For investors, this is a once-in-a-decade opportunity to capitalize on a structural shift in the $200 billion Indian IT ecosystem. Here’s why midcap IT stocks are primed for sustained outperformance—and why you should act now.

Execution Superiority: Midcaps Are Outpacing the Big Four in GenAI Adoption

The GenAI revolution is not a distant future—it’s here, and midcap IT firms are already monetizing it. While the Big Four remain mired in pilot projects and incremental optimizations, midcaps are embedding AI into their core service offerings with breakneck speed:

• Coforge’s GenAI-Driven Leap:
  Coforge’s $1.56 billion 13-year deal with travel tech giant Sabre—its largest ever—was built on its Quazar marketplace, which offers over 200 AI/GenAI tools. This platform enables clients like Sabre to automate tasks such as airline alerts and insurance policy scans, reducing costs while enhancing customer experience.
  

• Persistent’s Patent Advantage:
  Persistent Systems filed 15 new GenAI patents in FY25, bringing its total to 35. Its SASVA platform (specialized for regulated sectors like BFSI and healthcare) has driven 20 consecutive quarters of revenue growth. In Q4 FY25 alone, 59% of its deals were GenAI-led, compared to just 42% at HCLTech, the Big Four’s best performer.

• Hexaware’s Niche Agility:
  While less visible, Hexaware’s 13.7% FY25 revenue growth stems from its focus on engineering and manufacturing sectors. By tailoring AI solutions to these verticals, it avoids head-to-head battles with larger rivals.

In contrast, the Big Four are still in GenAI’s “experimental phase.” TCS CEO K. Krithivasan admitted their projects remain “small to medium in scope,” while Infosys’s pipeline struggles to convert pilots into revenue.

Leadership Stability: A Decade of Consistency vs. Turnover-Driven Turbulence

The single most critical factor in this midcap advantage? Leadership continuity.

• Midcap CEOs:
• Sudhir Singh (Coforge): CEO since 2017.
• Sandeep Kalra (Persistent): CEO since 2020.
• Srikrishna Ramakarthikeyan (Hexaware): CEO since 2014.

These leaders have built cultures of innovation, with Singh and Kalra aggressively reinvesting in AI talent and infrastructure.

• Big Four Turbulence:
• TCS’s K. Krithivasan (CEO since June 2023) and Wipro’s Srinivas Pallia (CEO since April 2024) face steep learning curves.
• Infosys’s Salil Parekh (CEO since 2021) has prioritized cost cuts over bold AI bets.

The result? Midcaps can pivot swiftly to GenAI opportunities, while Big Four rivals grapple with organizational inertia.

Deal Momentum: Midcaps Are Winning the Future, Today

The numbers speak for themselves:

• Coforge’s Order Backlog:
  Its FY25 order book hit $3.5 billion, with $2.1 billion added in Q4 alone—a 47.7% YoY surge. Analysts at Kotak Institutional Equities project 20.8% organic revenue growth in FY26, driven by cross-selling to Cigniti’s Fortune 500 client base.

• Persistent’s Pipeline Power:
  The company’s AI-led deals now account for 65% of its FY25 TCV (Total Contract Value), with a $34 million pipeline in AI programs. CEO Kalra’s focus on “scaling, not prototyping” is paying off.

• Hexaware’s Steady Gains:
  While smaller in scale, Hexaware’s 13.7% FY25 growth and stable leadership have positioned it to capitalize on niche AI opportunities in manufacturing and retail.

Meanwhile, the Big Four are losing ground:
- TCS’s FY26 order book started weaker than FY25.
- Wipro’s revenue fell 2.72% YoY in FY25, with FY26 guidance projecting flat growth.

Sector Dynamics: Midcaps Are Eating the Big Four’s Lunch

The writing is on the wall: midcaps are eroding the Big Four’s dominance by:

1. Niche Expertise:
2. Coforge dominates travel tech (Sabre deal).
3. Persistent leads in regulated industries (BFSI, healthcare).

4. Hexaware excels in engineering and manufacturing.

5. Cost Efficiency:
   Midcaps’ lean teams and specialized focus enable them to price deals 20–30% lower than Big Four rivals while delivering higher value through AI-driven automation.

6. Client Trust:
   As clients prioritize agility over scale, midcaps are becoming the go-to partners for GenAI projects. Everest Group’s Peter Bendor-Samuel notes, “Mid-tier firms are stealing market share because they deliver faster, more tailored solutions.”

Investment Recommendation: Buy Midcap IT Now

The data is clear: midcap IT firms are winning the GenAI race. Investors should allocate aggressively to:

1. Coforge (COFORGE.NS):
2. Rationale: Sabre deal, Quazar platform, and FY26 growth of 20.8%.

3. Target: 12–18 months to capture FY27’s $2 billion revenue milestone.

4. Persistent Systems (PERSISTENT.NS):

5. Rationale: AI patents, BFSI dominance, and 18.8% FY25 growth.

6. Target: 15–20% upside as AI-led deals hit scale.

7. Hexaware Technologies (HEXAWARE.NS):

8. Rationale: Stable leadership, 13.7% growth, and untapped AI potential in manufacturing.

Avoid the Big Four: Their reliance on legacy outsourcing models and leadership instability makes them laggards in a GenAI-driven world.

Final Call to Action

The GenAI revolution is here, and midcap IT firms are its pioneers. With structural advantages in execution, leadership, and deal momentum, these stocks are poised to deliver 20–30% returns over 12–18 months. Investors who act now will secure a seat at the table as the Indian IT landscape rewrites itself.

The clock is ticking—buy midcap IT stocks before the mainstream catches on.

Disclosure: This article is for informational purposes only and should not be construed as financial advice. Always conduct your own research before making investment decisions.