Why Jefferies Upgarded Its Stance On Indian IT Sector

Brokerage major Jefferies has changed its stance from underweights on the Indian IT sector, whilst adding shares of Infosys Ltd. to its model portfolio, as part of its India strategy note on July 27.

On the other hand, several other brokerages continue to expect negative bias to continue this week, however, fall seems to be limited. This comes after the tech-heavy Nasdaq Composite and the Dow Jones Industrial Average both closed marginally lower Friday.

What Changed Jefferies' Indian IT Sector Outlook

Earlier, Jefferies had stated that the Indian IT sector was down 25% this year, including the likes of TCS, Infosys, HCLTech and Wipro slipping between 35% to 50% from their two-year peaks.

Meanwhile, brokerage generally eye a revenue growth in the IT stocks to be in the low-to-mid-single digits over financial year 2026-2028, however, the reversal of the AI trade could drive a tactical upside in the sector, particularly after the sharp drawdown.

Further, it noted that the brokerage noted that the negative stock reaction to negative sector news has been much softer recently, indicating a tactical bottom.

Infosys also slashed the upper end of its FY2027 revenue growth guidance by 50 basis points to 1.5% to 3% from 1.5% to 3.5% earlier.Still, the stock ended only 0.8% lower on Friday, having recovered from an intraday drop of 3%.

As a result, Jefferies added Infosys to its model portfolio and raised its weightage on Coforge. It will fund its now "neutral" stance on IT by trimming its large "overweight" positions in power, real estate and hospitals.
Jefferies note in its note that several foreign portfolio investors (FPIs) had been running significant "underweights" on India, although their meetings in the last two weeks suggest that these positions are now either being reversed or re-evaluated.

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"As more focus shifts to the cost-benefits of AI, Indian equities could get some respite," Jefferies note said, adding that the AI trade has not only drawn FPI flows out of India, but also raised concerns on the potential fallout if the sudden job losses were to hit the industry.

Over the last five weeks, FPI flows have been a net positive $3 billion, ending the trend of the last four months, where overall outflows have been worth $29 billion.

As of 10:12 AM, the shares of Infosys was trading 2.80 % higher at Rs 1,070.00 apiece.