Stock Market Today: HCL Technologies, Tata Consultancy Services, and Infosys share prices, among other IT stocks, have underperformed during the first half of the calendar year, led by concerns about the global economic growth. The proposed tariffs further added to the uncertainties, especially in developed markets such as the US and Europe.

Not surprisingly, HCL Technologies, Tata Consultancy Services, and Infosys share prices have declined 10-17% during the year (year-to-date in 2025) despite the benchmark Nifty 50 Index having risen 7-8% in the calendar year to date.

With expected rate cuts in the US, expected to aid economic recovery, the progress in trade deals is being watched carefully. Can the IT sector experience recovery in the second half?

IT sector outlook and Q1 expectations

The sector faces challenges from global economic uncertainties, including potential US trade tariffs and macroeconomic headwinds in major markets such as the US and Europe. These factors are expected to weigh on growth prospects and may lead to a cautious approach in client spending, said Ajit Banerjee, President and Chief Investment Officer, Shriram Life Insurance.

The Indian IT sector is poised for moderate growth in Q1 FY26. The performance will be influenced by global economic conditions and client spending behaviors, added Banerjee.

Kotak Institutional Equities also believes that the quarter will be a mixed one, with mid-tier IT services companies reporting strong growth, while large IT companies and ERD names will disappoint.

The operating performance and deal wins will be watched. Deal wins will be strong, although not necessarily net new for the industry, as per Kotak Institutional Equities. They also expect EBIT margins to be stable.

Discretionary demand continues to be weak; however, few clients are proactive and want to be leaders in their sectors in terms of technology, said Banerjee. The deal pipeline remains strong, primarily consisting of large cost-efficient deals. While the financial services and energy & utilities verticals are expected to grow, manufacturing and retail & CPG verticals are likely to remain weak, said Banerjee.

Outlook on deal signing in 2QFY26 and beyond will be crucial, feel analysts at Motilal Oswal Financial Services. While this environment is not conducive to discretionary spending, they expect client enthusiasm to pick up, as serious GenAI projects, especially around productivity gains, start picking up and clients shrug off the uncertainty to focus on critical upgrades.

Mid-tier companies may be better placed—analysts.

Smart deal structuring, share gains, and a favorable portfolio (low manufacturing exposure) will drive strong growth for mid-tier companies, as per Kotak Institutional Equities. They expect Coforge to lead the growth, followed by Persistent, Hexaware, and Mphasis. TCS, Wipro, and ERD names will likely face cuts in earnings growth after results as per Kotak. Infosys, Tech Mahindra, Hexaware, Coforge, and Indegene are Kotak’s key picks

In mid-caps, Coforge remains the top pick of MOFSL too, and they also like LTIMindtree Ltd., or LTIM, in an improving environment. Their top picks in the large-cap space remain HCL Tech and Tech Mahindra.

Companies that effectively leverage advancements in generative AI and focus on cost-efficiency measures may be better positioned to navigate these challenges. Mid-tier companies are expected to outperform large caps in terms of growth. However, their cash flow conversion is weaker, client concentration is higher, and valuations are stretched, said Banerjee.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies and not of Mint. We advise investors to check with certified experts before making any investment decisions.