1 week ago
Market Gurus Favor Select Midcap IT Stocks Amid 2026 Volatility
Indian technology stocks have had a difficult start to 2026.
The main IT index is down more than 19%, although it rose over 5% in the past month.
Big companies such as Infosys, Tata Consultancy Services and HCLTech have also fallen in recent months.
Experts say customers are being careful about spending on optional technology projects.
They also say artificial intelligence may reduce some work and push companies to share productivity savings with customers.
However, AI could eventually create new services and larger projects.
Analysts believe IT companies that develop better AI solutions and move into higher-value work may do best.
Many experts therefore prefer selected midcap companies to large IT firms.
They still expect technology stocks to remain volatile in the near term.
The Nifty IT Index has fallen over 19% in 2026, despite gaining more than 5% over the past month.
Infosys, Tata Consultancy Services and HCLTech have declined by as much as 15% over six months.
Analysts say weak discretionary technology spending and global uncertainty continue to pressure large-cap IT companies.
Experts see artificial intelligence as a near-term source of revenue and employment pressure but a potential long-term growth opportunity.
Market opinions remain cautious overall, with a preference for agile, company-specific midcap IT investments over large caps.
- Who
- Indian IT companies and market experts from First Global, Kotak Mahindra Asset Management Company, Motilal Oswal Financial Services, CLSA and PPFAS.
- What
- Market experts are assessing whether the fall in IT stocks has created an investment opportunity, with greater preference for selected midcap companies than large caps.
- Where
- The discussion focuses on India’s technology sector and its exposure to global technology markets.
- When
- The assessment concerns 2026, including performance year to date and the previous six months.
- Why
- Global economic uncertainty, weak discretionary technology spending and artificial-intelligence disruption are affecting near-term earnings and valuations.
Midcap IT Preference
Large-Cap IT Caution
Investment preference
Midcap IT Preference
Several experts favor selected midcap IT companies because they see a growth differential and greater agility in delivering artificial-intelligence-led solutions.
Large-Cap IT Caution
Experts remain cautious on large caps because their growth is still closely tied to broad sector trends and near-term demand remains muted.
Artificial-intelligence impact
Midcap IT Preference
AI could create new revenue, larger transformation projects, higher-value consulting work and better scalability over the medium to long term.
Large-Cap IT Caution
In the near term, AI may compress revenue, reduce staffing needs per unit of business and lead clients to demand productivity-related price concessions.
Sector positioning
Midcap IT Preference
First Global takes a selective approach across midcaps and large caps, while Motilal Oswal Financial Services includes Coforge and Infosys in its model portfolio.
Large-Cap IT Caution
Kotak Mahindra Asset Management Company is neutral to marginally underweight, and Motilal Oswal Financial Services remains underweight on IT overall.
Key facts
- Nifty IT Index in 2026
- Down over 19% year to date.
- Nifty IT Index, past month
- Up over 5%.
- Large-cap performance
- Infosys, Tata Consultancy Services and HCLTech are down as much as 15% over six months.
- First Global view
- The downside may be limited, but companies need to pivot and move up the value chain.
- Kotak Mahindra Asset Management Company view
- Neutral to marginally underweight on IT, with a preference for midcap companies.
- Motilal Oswal Financial Services view
- Underweight on IT overall, with Coforge and Infosys in its model portfolio.
- Artificial-intelligence outlook
- Potentially a near-term headwind but a medium- to long-term business amplifier and growth opportunity.
Quotes
Shibani Kurian
Sr. Fund Manager and Head of Equity Research at Kotak Mahindra AMC
““We expect continued volatility in IT stocks in the near term – in line with the sharp volatility in all other segments of global tech. The global macro uncertainty is also adding to volatility in discretionary tech spend leading to a muted near-term growth outlook.””
financialexpress.com
““the obituary of the IT sector has been written many many times. If you look at the chronology, first of all it was Y2K, then there was digitisation, there was cloud, there was software as a service and again this business model is disrupted.””
financialexpress.com
Sources
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