Indian IT services companies are navigating a "perfect storm" of artificial intelligence-led disruption and macroeconomic uncertainty, which is likely to keep near-term growth subdued despite a favourable long-term outlook, according to Nomura.
The brokerage said the Nifty IT Index has underperformed the broader market by 20% since the start of 2026, largely due to valuation compression amid concerns over AI-driven disruption. However, it believes the long-term addressable market for Indian IT services will expand rather than shrink.
Nomura said ongoing geopolitical tensions in the Middle East and uncertainty around US interest rates are weighing on client spending. At the same time, muted technology budgets have intensified competition among IT services firms, with the productivity gains from AI increasingly being passed on to customers instead of boosting margins.
Reflecting these headwinds, the brokerage revised target prices for several IT stocks. It downgraded Tech Mahindra to "Neutral" from "Buy" and lowered its target price to Rs 1,410 from Rs 1,760.
Target prices were also reduced for Infosys, Tata Consultancy Services, HCLTech, Wipro, Coforge, Persistent Systems, Birlasoft, Firstsource Solutions, Sagility India and eClerx Services, among others, while maintaining positive ratings on most large-cap names.
Separately, Nomura reiterated its "Buy" rating on CarTrade Tech and raised its target price to Rs 3,286 from Rs 2,740.
The brokerage said the company is leveraging AI across its platforms, including CarWale and OLX, to improve user engagement and create new revenue streams through services such as matchmaking, pricing analysis, inspections and financing, supporting medium-term growth and margin expansion.