Kotak cuts Indian IT estimates on GenAI deflation
UTTAR PRADESH, INDIA — Kotak Institutional Equities has slashed fair value estimates across India’s major IT services stocks by 2–21%, projecting broad revenue weakness in Q1 FY27 as GenAI-driven productivity pass-throughs and the West Asia crisis offset seasonal demand — a sector repricing that cross-anchors with the Teleperformance-Concentrix selloff as AI compresses margins across both offshore CX and IT delivery simultaneously.
Kotak slashes Indian IT estimates amid GenAI deflation
Kotak’s Q1 FY27 projections put TCS flat, Infosys up 1% quarter-on-quarter, Wipro down 1.1%, HCL Tech down 1%, and Tech Mahindra up 1% — a broad-based softness across the Indian IT sector with no major company posting meaningful sequential growth against what has historically been a seasonally strong quarter.
The rupee compounds the revenue headwind: a 2.6% QoQ and 9.7% YoY decline in USD-INR terms means Indian IT companies face simultaneous dollar-revenue compression and currency-translation drag on top of the structural AI productivity pass-through.
The productivity pass-through is the mechanism AI brings to the Indian IT cost equation: efficiency gains that accrue to clients as lower per-unit pricing, not to IT service providers as margin expansion — a structural repricing that does not require headcount reduction to compress revenue.
“Revenue growth for Indian IT companies is likely to be weak in the June quarter of FY27, with the usual seasonal strength offset by the West Asia crisis and higher productivity pass-throughs,” Kotak Institutional Equities stated.
GenAI efficiency gains compress Indian IT revenue growth
Fair value cuts ranged from 2% to 21% across Kotak’s coverage: TCS to Rs 2,450 (Add), Infosys to Rs 1,220 (Buy), Wipro to Rs 150 (Sell), and HCL Tech to Rs 1,120 (Add) among the revised targets, with Mphasis, Coforge, Tech Mahindra, and LTIMindTree also included in the sector-wide estimate revision.
Wipro (Sell, Rs 150) and KPIT (Sell, Rs 520) received the most bearish ratings in the Kotak coverage universe, reflecting differentiated exposure to productivity pass-through risk across the Indian IT stack compared to peers with stronger buy ratings such as Mphasis (Buy, Rs 2,210) and Coforge (Buy, Rs 1,640).
The West Asia crisis functions as an external demand shock layered onto a structural AI repricing — with Kotak’s Q1 FY27 projections reflecting both a cyclical headwind and a directional shift in what Indian IT services cost as clients absorb AI productivity gains into contract pricing.
For Indian IT stocks, Kotak’s repricing documents a market where AI-enabled efficiency improvements accrue to clients as lower pricing — exactly the dynamic visible concurrently in the Concentrix-Teleperformance CX outsourcing selloff, where function elimination and cost pressure are compressing the same offshore revenue base from the CX side.
Kotak Institutional Equities noted the estimate reductions apply across both Indian IT’s largest companies and mid-cap players, reflecting a sector-wide recalibration rather than company-specific underperformance — a repricing driven by structural GenAI dynamics that the research house applied uniformly across its coverage universe.
For BPO operators and GCC builders tracking India as a delivery market, the Kotak repricing documents what client-side AI adoption looks like in practice: not canceled mandates but lower per-unit pricing and suppressed seasonal strength — a structural compression of what Indian IT services cost that is reshaping how offshore delivery value is distributed between providers and their clients.
