In its latest sector update ahead of the Q4FY26 earnings season, international brokerage Nomura has signalized a shift in the Indian IT landscape. While macro uncertainties like the Middle East conflict persist, Nomura believes the industry is moving from AI experimentation to actual implementation, creating a “buy on dips” opportunity for specific players.
Despite the optimism, Nomura has lowered target multiples across its coverage by 15-20% to account for near-term demand volatility.
1. Top Stock Picks by Market Cap
Nomura’s selection focuses on companies with resilient margins and strong positioning in the BFSI (Banking, Financial Services, and Insurance) vertical.
| Segment | Top Picks | Recent Upgrades |
| Large-Cap | Infosys, Cognizant | TCS, LTI Mindtree (to Buy) |
| Mid-Cap | Coforge | Mphasis, Birlasoft (to Buy) |
| Small-Cap | eClerx | L&T Tech Service (to Neutral) |
2. The AI Transition: From “PoC” to “Execution”
A pivotal part of Nomura’s rationale is the evolution of Artificial Intelligence within client workflows.
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Proof-of-Concept (PoC) Era: For the past year, clients were largely experimenting with small-scale AI projects.
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Execution Phase: Clients are now moving toward standalone implementations. Over the next 12–18 months, this is expected to drive significant revenue in cloud computing, data management, and automation.
3. Q4FY26 Expectations: A Mixed Bag
The brokerage expects uneven performance for the quarter ending March 2026:
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Large-Caps: Expected to remain sluggish with flat to low single-digit revenue growth (QoQ) in constant currency.
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Mid-Caps: Companies like Coforge and Persistent Systems are expected to outperform their larger peers in growth momentum.
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The Rupee Tailwind: The continued depreciation of the Rupee (trading above 93 per Dollar) acts as a natural hedge, likely aiding margin improvement since most revenue is earned in USD.
4. Conservative FY27 Guidance
Investors are advised to brace for cautious management commentary. Nomura highlights:
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Infosys: Expected FY27 revenue growth guidance of 1-4% (organic) with operating margins between 20-22%.
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HCL Tech: Expected growth in the 2-5% range.
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Macro Headwinds: High energy prices and geopolitical instability in West Asia remain the primary “unknowns” that could dampen client spending in the second half of the year.
Summary Table: Nomura’s IT Strategy for April 2026
| Key Driver | Impact | Strategy |
| AI Demand | Positive (Long-term) | Focus on companies with strong data/cloud capabilities. |
| Currency (INR/USD) | Positive (Margins) | Weaker Rupee offsets some wage inflation/cost pressures. |
| BFSI Vertical | Stable | Stability in banking tech spend supports large-cap earners. |
| Valuations | Adjusted | Multiples cut by 15-20% due to global macro risks. |
Bottom Line: Nomura’s report suggests that while the “growth engine” for Indian IT hasn’t fully restarted, the shift toward AI execution makes current valuations attractive for long-term investors, provided they stick to quality names like Infosys and Coforge.
