Indian information technology services companies may be approaching a new investment cycle following a sharp valuation correction, with domestic brokerage Nuvama expressing renewed optimism about the sector’s medium-term outlook. In a recent research note, the brokerage upgraded several large IT firms and issued buy recommendations across the top ten companies under its coverage, suggesting that the current price levels offer meaningful upside potential.

The bullish stance comes at a time when the sector has been under pressure amid concerns that the rapid advancement of Generative Artificial Intelligence could disrupt traditional IT services models. Over the past few months, investor sentiment toward the sector weakened as global technology companies began integrating AI tools capable of automating certain programming, testing and enterprise software tasks.

However, Nuvama argues that the threat to Indian IT services firms may have been overstated. According to the brokerage, while AI technologies can improve efficiency and automate parts of the development process, enterprises will continue to require system integrators that can customise software solutions, manage implementation, and oversee the integration of complex technology ecosystems. Such services remain difficult to replace through automated tools alone.

As highlighted in the brokerage report, system integration remains a critical component of enterprise technology adoption. Businesses increasingly deploy a mix of cloud platforms, enterprise software suites, cybersecurity solutions, and industry-specific applications. Ensuring these technologies communicate effectively and are customised to business requirements continues to require specialised expertise from service providers.

The note further suggests that periods of technological transition historically have not weakened the IT services industry. Instead, they often create new demand for consulting, migration services, and digital transformation projects. Similar concerns about disruption had emerged during earlier waves of technological change, including the transition to cloud computing and the rise of automation tools. In those cases, Indian IT companies ultimately benefited from the increased complexity of enterprise technology environments.

From a valuation standpoint, the brokerage believes the sector’s recent correction has created an attractive entry point for investors. IT stocks have seen noticeable declines over the past two months, partly reflecting global technology market volatility and cautious guidance from several companies regarding discretionary spending by international clients.

Against this backdrop, Nuvama has assigned buy ratings to all the top ten IT services companies it tracks. The brokerage upgraded HCL Technologies, Wipro, Tech Mahindra and Hexaware to buy, signalling a broader shift in its sector view. According to the report, investors could potentially see strong returns over the next 12 to 15 months if sector demand stabilises and enterprise spending improves.

Among the firms covered, Coforge is seen offering the highest potential upside, with a target price of ₹2,100 implying an estimated 84 percent gain from current levels. Mphasis follows with a target price of ₹3,100, suggesting about 42 percent upside, while LTIMindtree’s target price of ₹6,100 implies a potential gain of roughly 41 percent.

For the larger industry leaders, Tata Consultancy Services has a target price of ₹3,300, indicating around 31 percent upside, while Persistent Systems is expected to rise about 26 percent to ₹6,000. Infosys carries a target price of ₹1,650, implying a potential gain of roughly 27 percent.

Other companies highlighted in the report include Tech Mahindra and Hexaware, each with a target price suggesting roughly 24 percent upside. Wipro’s target price of ₹240 implies about 21 percent upside, while HCL Technologies has a more moderate potential gain of around 14 percent with a target price of ₹1,550.

The brokerage’s positive outlook reflects a broader belief that the IT services business model will evolve alongside AI rather than be displaced by it. Generative AI tools may reduce the time required for certain coding tasks, but they are also expected to create new demand for consulting, implementation and governance services as enterprises attempt to integrate AI into their operations.

For Indian technology companies, this transition could potentially lead to new service lines, including AI model integration, enterprise AI governance frameworks and industry-specific automation solutions.

From a market perspective, the report may provide a near-term sentiment boost to the IT sector, which remains one of the largest contributors to India’s equity markets and export revenues. Indian IT firms derive a significant share of their income from global clients, particularly in the United States and Europe, making investor perception of the sector highly sensitive to global technology trends.

A recovery in IT valuations could also support broader market stability given the sector’s substantial weight in major indices.